On the role of inflation in consumption function
Koskela, Erkki; Virén, Matti (30.03.1984)
Numero
4/84Julkaisija
Bank of Finland
1984
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2023070479555Tiivistelmä
The purpose of this paper is to re-examine the role of inflation in household consumption behavior both in terms of the observed rate of inflation and inflation uncertainty. First, we show what is 'exactly' the relationship between the Deaton story of involuntary saving and
the consumption function specification of Davidson, Hendry, Srba and Yeo.
Second, we present a way of deriving the latter specification from an explicit intertemporal model of consumer choice. Third, we compare these two consumption function specifications using quarterly U.K. data. This comparison gives support to the latter specification, furthermore suggesting that inflation uncertainty does, in fact, influence household consumption behavior negatively.
the consumption function specification of Davidson, Hendry, Srba and Yeo.
Second, we present a way of deriving the latter specification from an explicit intertemporal model of consumer choice. Third, we compare these two consumption function specifications using quarterly U.K. data. This comparison gives support to the latter specification, furthermore suggesting that inflation uncertainty does, in fact, influence household consumption behavior negatively.