Author: Marjorie Flavin
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 53
Book Description
The paper investigates the implications of the omitted information problem -- that is, the econometric problem which arises because an econometrician cannot explicitly include the complete set of variables potentially used by agents -- in the context of the "excess smoothness" phenomenon posed by Deaton 11987]. The paper shows that an econometrician who fails to take into account the effects of omitted information will incorrectly conclude that an empirical finding of excess smoothness of consumption implies that the income process is nonstationary. By contrast, with a more thorough understanding of the omitted information problem, the finding of excess smoothness of consumption is easily explained with two assumptions: a) the consumption data is generated by the excess sensitivity alternative hypothesis, in which consumption is a weighted average of current income and permanent income, and b) agents are forecasting on the basis of a larger information set than the econometrician. Further, excess smoothness is revealed to be consistent with a wide range of stationary income processes as well as nonstationary income processes. Thus the common presumption that the excess smoothness phenomenon is linked in an essential way to the stationarity or nonstationarity of the income process evaporates when omitted information is taken into consideration
The Excess Smoothness of Consumption
Author: Marjorie Flavin
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 53
Book Description
The paper investigates the implications of the omitted information problem -- that is, the econometric problem which arises because an econometrician cannot explicitly include the complete set of variables potentially used by agents -- in the context of the "excess smoothness" phenomenon posed by Deaton 11987]. The paper shows that an econometrician who fails to take into account the effects of omitted information will incorrectly conclude that an empirical finding of excess smoothness of consumption implies that the income process is nonstationary. By contrast, with a more thorough understanding of the omitted information problem, the finding of excess smoothness of consumption is easily explained with two assumptions: a) the consumption data is generated by the excess sensitivity alternative hypothesis, in which consumption is a weighted average of current income and permanent income, and b) agents are forecasting on the basis of a larger information set than the econometrician. Further, excess smoothness is revealed to be consistent with a wide range of stationary income processes as well as nonstationary income processes. Thus the common presumption that the excess smoothness phenomenon is linked in an essential way to the stationarity or nonstationarity of the income process evaporates when omitted information is taken into consideration
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 53
Book Description
The paper investigates the implications of the omitted information problem -- that is, the econometric problem which arises because an econometrician cannot explicitly include the complete set of variables potentially used by agents -- in the context of the "excess smoothness" phenomenon posed by Deaton 11987]. The paper shows that an econometrician who fails to take into account the effects of omitted information will incorrectly conclude that an empirical finding of excess smoothness of consumption implies that the income process is nonstationary. By contrast, with a more thorough understanding of the omitted information problem, the finding of excess smoothness of consumption is easily explained with two assumptions: a) the consumption data is generated by the excess sensitivity alternative hypothesis, in which consumption is a weighted average of current income and permanent income, and b) agents are forecasting on the basis of a larger information set than the econometrician. Further, excess smoothness is revealed to be consistent with a wide range of stationary income processes as well as nonstationary income processes. Thus the common presumption that the excess smoothness phenomenon is linked in an essential way to the stationarity or nonstationarity of the income process evaporates when omitted information is taken into consideration
On Excess Smoothness and Excess Sensitivity in U.S. Consumption
Author: Clifford L. F. Attfield
Publisher:
ISBN:
Category : Applied mathematics
Languages : en
Pages :
Book Description
Publisher:
ISBN:
Category : Applied mathematics
Languages : en
Pages :
Book Description
The Excess Smoothness of Consumption
Author: Gene M. Grossman
Publisher:
ISBN:
Category : Capitalists and financiers
Languages : en
Pages : 33
Book Description
Publisher:
ISBN:
Category : Capitalists and financiers
Languages : en
Pages : 33
Book Description
The Excess Smoothness of Consumption
The Excess Smoothness Puzzle in Consumption
Is Consumption Too Smooth?
Author: John Y. Campbell
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 38
Book Description
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 38
Book Description
Is Consumption Too Smooth?
Author: Francis X. Diebold
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 36
Book Description
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 36
Book Description
Consumption : innovation persistence and the excess smoothness debate
Author: Kerry D. Patterson
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 22
Book Description
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 22
Book Description