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Smooth transition in aggregate consumption

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  • Yiuman Tse
  • Tatyana Zabotina

Abstract

The STAR model is used to characterize the time series of aggregate consumption. It makes smooth transition from one optimal level to another, as heterogeneous individuals reach their optimal revision points over time. These results suggest that consumption adjustment costs and heterogeneity among investors are responsible for the empirical failure of the consumption-based CAPM.

Suggested Citation

  • Yiuman Tse & Tatyana Zabotina, 2002. "Smooth transition in aggregate consumption," Applied Economics Letters, Taylor & Francis Journals, vol. 9(7), pages 415-418.
    • Handle: RePEc:taf:apeclt:v:9:y:2002:i:7:p:415-418
    DOI: 10.1080/13504850110094478
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    References listed on IDEAS

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    1. Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages 119-136, Suppl. De.
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    Cited by:

    1. Raymund Abara, 2006. "Estimation and evaluation of asset pricing models with habit formation using Philippine data," Applied Economics Letters, Taylor & Francis Journals, vol. 13(8), pages 493-497.

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