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Separability and Aggregate Shocks in the Life‐cycle Model of Consumption: Evidence from Spain
Author(s) -
Collado M. Dolores
Publication year - 1998
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.00096
Subject(s) - economics , consumption (sociology) , aggregate (composite) , permanent income hypothesis , econometrics , consumer expenditure survey , panel data , life cycle hypothesis , aggregate expenditure , macroeconomics , social science , materials science , sociology , composite material
The purpose of this paper is to test the life‐cycle permanent income hypothesis using an unbalanced panel from the Spanish family expenditure survey. Our model accounts for aggregate shocks and non‐separability in the Euler equation among consumption goods, contrary to most of the literature in this area. Our results do not indicate excess sensitivity of consumption growth to income.