search query: @indexterm STATISTICAL METHODS / total: 745
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| Author: | Diebold, F. X. Rudebusch, G. D. |
| Title: | Is consumption too smooth? Long memory and the Deaton paradox |
| Journal: | Review of Economics and Statistics
1991 : NOV, VOL. 73:1, p. 1-9 |
| Index terms: | CONSUMPTION INCOMES STOCHASTIC PROCESSES STATISTICAL METHODS |
| Language: | eng |
| Abstract: | Under common ARIMA representation of income, the permanent-income hypothesis predicts that the volatility of consumption should be larger than the volatility of unanticipated shocks to income. This prediction is not supported by the data. It is examined whether this apparent excess smoothness of consumption is the result of the ARIMA representation's implicit restrictions on low-frequency dynamics. By using a generalized long-memory stochastic representation, confidence intervals are constructed for the long-run impulse response of income in the absence of such low-frequency restrictions. These intervals are quite wide and include regions in which excess smoothness vanishes. |
SCIMA