Research ArticleOpen AccessGoogle Scholar indexed
Short-Run and Long-Run Co-Movements in the Income-Consumption Relationship
Lee Shau Kee School of Business and Administration, The Open University of Hong Kong, Hong Kong, China
Lee Shau Kee School of Business and Administration, The Open University of Hong Kong, Hong Kong, China
- 1 Lee Shau Kee School of Business and Administration, The Open University of Hong Kong, Hong Kong, China
- 2 Lee Shau Kee School of Business and Administration, The Open University of Hong Kong, Hong Kong, China
Theoretical Economics Letters·Volume 08 (2018)·Pages 814–819·Published 19 March 2018·DOI10.4236/tel.2018.85057
Copy link · social · email
Abstract
The study uses the cointegration and common cycle analysis to test whether there are short-run and long-run co-movement relationships between incomes and varies consumption expenditure variables. The analysis aims to detect the long-run co-movements between income and five types of consumption variables, which provides supporting evidence for the common brief that income drives consumption in the long-run. In addition, the analysis also attempts to detect if there are short-run co-movements between income and consumption.
KeywordsCommon CyclesCommon FeaturesCointegrationConsumers’ Expenditure
- Bertola, G., Guiso, L. and Pistaferri, L. (2005) Uncertainty and Consumer Durables Adjustment. Review of Economic Studies, 72, 973-1007. https://doi.org/10.1111/0034-6527.00358
- Gali, J. (1993) Variability of Durable and Nondurable Consumption: Evidence for Six OECD Countries. The Review of Economics and Statistics, 75, 418-428. https://doi.org/10.2307/2109455
- Cook, S. (2000) Long-Run and Short-Run Co-Movement in UK Consumption and iNcome. Economics Letters, 67, 11-13. https://doi.org/10.1016/S0165-1765(99)00240-2
- Wei, S.-J. (2010) Why Do the Chinese Save So Much? Forbes. https://www.forbes.com/2010/02/02/china-saving-marriage-markets-economy-trade.html#5817172d7a83
- Modigliani, F. and Brumberg, R. (1954) Utility Analysis and the Consumption Function: An Interpretation of Cross-Section Data. In: Kurihara, K., Ed., Post Keynesian Economics, New Brunswick: Rutgers University Press, 388-436.
- Friedman, M. (1957) Introduction to “A Theory of the Consumption Function”. A Theory of the Consumption Function, I, 1-6.
- Hall, R.E. (1978) Stochastic Implications of the Lifecycle Permanent Income Hypothesis: Theory and Evidence. Journal of Political Economy. https://doi.org/10.1086/260724
- Flavin, M.A. (1981) The Adjustment of Consumption to Changing Expectations about Future Income. Journal of Political Economy, 89, 974-1009. https://doi.org/10.1086/261016
- Campbell, J.Y. and Mankiw, N.G. (1989) Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence. NBER Macroeconomics Annual, 4, 185-216. https://doi.org/10.1086/654107
- Lane, P. (1989) The Consumption Function. Student Economic Review, 3, 26-29.
- NAICS, Statistics Canada (2012) NAICS’s Statistical Classifications: Durable/Non-Durable Manufacturing Industries. http://www23.statcan.gc.ca/imdb/p3VD.pl?Function=getCET_Page&VD=128494&Item=130109&db=IMDB
- Engle, R.F. and Susmel, R. (1993) Common Volatility In International Equity Markets. Journal of Business and Economic Statistics, 11, 167-176.
- Engle, R.F. and Vahid, F. (1997) Codependent Cycles. Journal of Econometrics, 80, 199-221. https://doi.org/10.1016/S0304-4076(97)00032-8
- Hofstede, G. (2017) Country Comparison-Hofstede Insights. Hofstede Insights. https://www.hofstede-insights.com/country-comparison/hong-kong,the-uk,the-usa