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ERROR‐CORRECTION, ⇐ SURPRISE ⇒ MODELS AND THE DIFFERENTIAL APPROACH TO THE CONSUMPTION FUNCTION (*)
Author(s) -
Rossi N.,
Schiantarelli F.
Publication year - 1988
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.1988.tb00869.x
Subject(s) - surprise , consumption (sociology) , generalization , economics , function (biology) , mathematical economics , separable space , consumption function , error correction model , econometrics , error detection and correction , random walk , differential (mechanical device) , homothetic transformation , mechanism (biology) , mathematics , microeconomics , physics , statistics , production (economics) , psychology , sociology , mathematical analysis , epistemology , cointegration , social psychology , algorithm , philosophy , social science , biology , geometry , evolutionary biology , thermodynamics
The paper provides a general theoretical framework that allows a comparison and a possible reconciliation of error correction models of consumers’behaviour and the life cycle hypothesis under rational expectations. It is suggested that by relaxing the assumption of intertemporally strongly separable and homothetic preferences, a generalization of Hall's random walk model can be derived, containing an error correction mechanism.