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Consumption smoothing across seven countries: A time series analysis

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  • Fitzenberger, Bernd

Abstract

With representative agents maximizing their expected Xife time Utility, it can be shown under certain functional form assumptions that consumption follows a random walk and should be cointegrated across countries, because in an optimal risk pooling arrangement agents smooth consumptions with respect to erratic income movements. These implications are analyzed for the G-7-countries using spectral based and coIntegration techniques. Also the contemporaneous and causal feedback and a factor analytical model are estimated for the first differences of the consumption series. The results indicate little comovement of consumption across countries for annual data from 1950 to 1985.

Suggested Citation

  • Fitzenberger, Bernd, 1991. "Consumption smoothing across seven countries: A time series analysis," Discussion Papers, Series II 126, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:126
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