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NONLINEARITY, CYCLICITY, AND PERSISTENCE IN CONSUMPTION AND INCOME RELATIONSHIPS: RESEARCH IN HONOR OF MELVIN J. HINICH

Published online by Cambridge University Press:  24 April 2012

Fredj Jawadi  and
Patrick Leoni
Fredj Jawadi*
Affiliation:
University of Evry Val d'Essonne
Patrick Leoni
Affiliation:
EUROMED Management
*
Address correspondence to: Fredj Jawadi, UFR Sciences Sociales et Gestion, Université d'Evry Val d'Essonne, Bat. La poste, Bureau 228 2, rue du Facteur Cheval, 91025 Evry Cedex, France; e-mail: [email protected].
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Abstract

This paper is dedicated to the memory of the great statistician Melvin J. Hinich, with whom we were in contact about this research prior to his untimely death from a tragic fall. We develop a neoclassical growth model with habit formation to exhibit an equilibrium nonlinear relationship between aggregate consumption growth and income growth. We first provide empirical evidence consistent with this relationship both for the United States and France, and we reject the hypothesis of a random walk for consumption. We then estimate this nonlinear relationship. We find for both countries robust evidence of persistence, nonlinearity, and cyclicity in the relationship between consumption and income.

Keywords

Aggregate consumptionNonlinear analysis
Type
Articles
Information
Macroeconomic Dynamics , Volume 16 , Supplement S3 , November 2012 , pp. 376 - 393
Copyright
Copyright © Cambridge University Press 2012

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