Aggregation and simple dynamics

Arthur Lewbel

78 citations0/0 files storedAmerican Economic Review

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Monetary Policy and Economic Impact Economic theories and models Complex Systems and Time Series Analysis

Abstract

The koyck (geometric) lag or AR(1) specification is a commonly proposed behavioral model, sometimes after differencing. The distribution of koyck lag or AR(1) coefficients across agents in an economy is shown to be completely identified just from the dynamic behavior of aggregate (macroeconomic) data. Aggregate testable implications of an economy composed of agents having koyck lags or AR(1) models are provided. Extensions to higher-order and time-varying lags are discussed. Aggregate U.S. consumption data are shown to support the hypothesis that some consumers have random-walk consumption, while the rest have ARIMA (1, 1, 0) consumption with widely varying AR coefficients. Copyright 1994 by American Economic Association.

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References

1980AN INTRODUCTION TO LONG‐MEMORY TIME SERIES MODELS AND FRACTIONAL DIFFERENCING 1989Consumption and Liquidity Constraints: An Empirical Investigation 1980Long memory relationships and the aggregation of dynamic models 1989Saving and Liquidity Constraints 1991A Simple Test of Consumption Insurance 1991Full Insurance in the Presence of Aggregate Uncertainty 1986Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis 1991The Rank of Demand Systems: Theory and Nonparametric Estimation

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