The Consumer Expenditure Function

Abstract

The Consumer Expenditure Function A consumer expenditure function which integrates pure consumption and household investment in durable goods is formulated and estimated.Because of reduced reliance on the official classification of conmiodities as durable or nondurable, a considerable increase in ability to explain consumer expenditures results as compared to multiequation models.Further empirical investigation provides strong evidence that: (1) private sector income is significantly better than disposable personal income for explaining consumer expenditures, (2) the definition of money is similarly superior to both and definitions, and (3) the weight of current income in permanent in- come is about 10% per annum.Data appendix included.

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