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Cambridge Journal of Economics 24:177-191 (2000)
Copyright © 2000 Cambridge Political Economy Society

Article

A neglected controversy in the modelling of consumers' expenditure

S Cook

Coventry Business School, University of Coventry, Priory Street, Coventry CV1 5FB, UK
E-mail: steven.cook@coventry.ac.uk

Abstract

In 1989 and 1992, Thomas noted the divergence of the 'stylised history' of the consumption function from the true sequence of events in its early history. To the list of overlooked elements can now be added the debate on the cyclical nature of consumption considered here. Analysis of the data used in the original studies shows a simplistic model considered at the time to be the 'best' available. This contrasts sharply with Spanos (1989), who was critical of the methods of the initial consumption researchers. However, use of recursive estimation shows concerns over a varying marginal propensity to consume to be unwarranted.

Key Words: Consumption function • History of econometrics • Model comparison


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