IDEAS home Printed from https://ideas.repec.org/a/bla/obuest/v54y1992i3p431-54.html
   My bibliography  Save this article

Wealth Effects and Exogeneity: The Norwegian Consumption Function 1966(1)-1989(4)

Author

Listed:
  • Brodin, P Anders
  • Nymoen, Ragnar

Abstract

The authors analyze the determinants of Norwegian households' consumption expenditure, using quarterly data for the period 1966(1)-1989(4). Expenditure, income and a broad measure of households wealth appear to form a cointegrating relationship. Likelihood ratio tests do not disprove that the cointegrating vector can be estimated efficiently from a single equation, i.e. a "consumption function." On this basis, a dynamic model of private expenditure is developed. Despite structural breaks in both the income and wealth processes, the consumption function displays considerable parameter constancy. Thus, the model can be attributed at least some degree of autonomy and structural invariance. On the basis of the parameter invariance tests, the "Lucas-critique" is in fact refuted. Consequently, the rational expectations approach yields (surprisingly) little insight into the causes of "breakdown" in pre-existing models. Instead their results suggest a more prosaic "left out variables" explanation, namely long-run wealth effects. Copyright 1992 by Blackwell Publishing Ltd

Suggested Citation

  • Brodin, P Anders & Nymoen, Ragnar, 1992. "Wealth Effects and Exogeneity: The Norwegian Consumption Function 1966(1)-1989(4)," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 431-454, August.
    • Handle: RePEc:bla:obuest:v:54:y:1992:i:3:p:431-54
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Engelbert Stockhammer & Erik Bengtsson, 2020. "Financial effects in historic consumption and investment functions," International Review of Applied Economics, Taylor & Francis Journals, vol. 34(3), pages 304-326, May.
    2. Chen, Jie, 2006. "Housing Wealth and Aggregate Consumption in Sweden," Working Paper Series 2006:16, Uppsala University, Department of Economics.
    3. Takala, Kari, 1995. "The consumption function revisited : an error-correction model for Finnish consumption," Research Discussion Papers 20/1995, Bank of Finland.
    4. Ivana Jovanović, 2016. "Modelling Consumption On The Basis Of The Complete System Of National Accounts In Serbia – The Wealth Effect," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 61(208), pages 49-72, January -.
    5. Eilev Jansen, 2013. "Wealth effects on consumption in financial crises: the case of Norway," Empirical Economics, Springer, vol. 45(2), pages 873-904, October.
    6. John N. Muellbauer, 2007. "Housing, credit and consumer expenditure," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 267-334.
    7. Øyvind Eitrheim & Bjarne Gulbrandsen, 2001. "A model based approach to analysing financial stability," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 311-330, Bank for International Settlements.
    8. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
    9. Pål Boug & Ådne Cappelen & Eilev S. Jansen & Anders Rygh Swensen, 2021. "The Consumption Euler Equation or the Keynesian Consumption Function?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(1), pages 252-272, February.
    10. repec:zbw:bofrdp:1995_020 is not listed on IDEAS
    11. H. Youn Kim & José Alberto Molina & Ka Kei Gary Wong, 2022. "Durable Goods and Consumer Behavior with Liquidity Constraints: Evidence from Norway," Boston College Working Papers in Economics 1047, Boston College Department of Economics.
    12. Hansen, Hermann-Josef, 1996. "Der Einfluß der Zinsen auf den privaten Verbrauch in Deutschland," Discussion Paper Series 1: Economic Studies 1996,03, Deutsche Bundesbank.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:obuest:v:54:y:1992:i:3:p:431-54. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.