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Determinants of private consumption

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  • A. Bayar
  • K. Mc Morrow

Abstract

This paper looks at the evolution of consumption theory over time and critically examines the widely accepted permanent income / life cycle hypotheses concerning consumer behaviour in terms of the empirical evidence. Attention is also devoted to the role of time horizon, time preference and capital market imperfections in determining the consumption / savings split of individual consumers. The paper points out the forecasting inadequacies of an essentially Keynesian framework due to its insufficient attention to expectations and forward looking behaviour. The likely key influences on consumption trends in the Community over the medium to long run are examined including the reaction of consumption to both ongoing budgetary consolidation and financial liberalisation, the impact of taxation and social welfare reforms and finally the effect of demographic changes.

Suggested Citation

  • A. Bayar & K. Mc Morrow, 1999. "Determinants of private consumption," European Economy - Economic Papers 2008 - 2015 135, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0135
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    References listed on IDEAS

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    Cited by:

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    2. Abdulaziz Hamad Algaeed, 2017. "The Effects of Asymmetric Oil Price Shocks on the Saudi Consumption: An Empirical Investigation," International Journal of Energy Economics and Policy, Econjournals, vol. 7(1), pages 99-107.
    3. Jürgen Janger & Claudia Kwapil & Wolfgang Pointner, 2005. "The Determinants of Consumption Growth in Austria – Results of a Representative Survey," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 48-65.
    4. W. Jos Jansen & Niek J. Nahuis, 2004. "Which survey indicators are useful for monitoring consumption? Evidence from European countries," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(2), pages 89-98.
    5. Bruno Eugène & Philippe Jeanfils & Benoît Robert, 2003. "La consommation privée en Belgique," Working Paper Document 39, National Bank of Belgium.
    6. Katja Rietzler, 2005. "Modelling European Business Cycles (EBC Model): A Macroeconometric Model of Spain ; February 2005," Data Documentation 4, DIW Berlin, German Institute for Economic Research.

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