NBER Working Papers and Publications
|February 1987||Dynamic Factor Models of Consumption, Hours, and Income|
with Joseph G. Altonji, Aloysius Siow: w2155
This paper addresses two questions. First, what are the key factors that affect a consumer's lifetime budget constraint and how do they evolve over the lifecycle? Second, how do consumers respond to changes in these factors? We examine the permanent income hypothesis and the Keynesian consumption model using a dynamic factor model of consumption, hours, wages, unemployment, and income. We show that a quarterly dynamic factor model with restrictions on the lag structure nay be used with annual panel data to account for the fact that in many micro panel data sets the variables relevant to a study are measured at different time intervals and/or are aggregates for the calendar year. By using several income indicators we are able to extend the panel data studies of Hall and Mishkin and Bernanke...
Published: Altonji, Joseph G., Ana Paula Martins and Aloysius Siow. "Dynamic Factor Models Of Consumption, Hours And Income," Research in Economics, 2002, v56(1,Mar), 3-59. citation courtesy of