Working Papers, Konjunkturinstitutet - National Institute of Economic Research
Helena Johnsson and Peter Kaplan
An Econometric Study of Private Consumption Expenditure in Sweden
Abstract: A Consumption function based on the life-cycle hypothesis
is estimated using Swedish anuual data for the period 1970-1998. Hendry`s
general to specific approach is applied using an error correction model in
order to arrive at the preferred equation. In order to confirm the
estimated cointegrating relationship, the Johansen procedure is employed.
The preferred equation displays a good fit over the sample period and
diagnostic tests indicate that the parameters are robust over time. The
long run properties and the dynamic response to shocks in the exogenous
variable are evaluated using a system of simultaneous equations containing
the preferred eauation and a disaggregated form of the savings identity.
Results from the simulations are in accordance with intuition and
consistent with the life-cycle hypothesis.
42 pages, December 1, 1999
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