International Evidence on Sticky Consumption Growth
We estimate the degree of 'stickiness' in aggregate consumption growth (sometimes interpreted as reflecting consumption habits) for thirteen advanced economies. We find that, after controlling for measurement error, consumption growth has a high degree of autocorrelation, with a stickiness parameter of about 0.7 on average across countries. The sticky-consumption-growth model outperforms the random walk model of Hall (1978), and typically fits the data better than the popular Campbell and Mankiw (1989) model. In several countries, the sticky-consumption-growth and Campbell-Mankiw models work about equally well.
We thank Angela Espiritu and Stephanie Denis for excellent research assistance and the participants at the NBER Summer Institute for insightful comments. We are grateful to Ray Barrell, Carol Bertaut, Amanda Choy, Nathalie Girouard, Roberto Golinelli and Robert Metz for help in constructing the dataset. Data and econometric programs that generated all of the results in the paper are available from the first author's web page, http://econ.jhu.edu/people/ccarroll/. The views presented in this paper are those of the authors, and should not be attributed to the International Monetary Fund, its Executive Board, or management, or to the European Central Bank, or to the National Bureau of Economic Research.
Christopher D. Carroll & Jiri Slacalek & Martin Sommer, 2011. "International Evidence on Sticky Consumption Growth," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1135-1145, 06. citation courtesy of