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Christopher D. Carroll, Jiri Slacalek, Martin Sommer
NBER Working Paper No. 13876
Issued in March 2008
NBER Program(s): EFG
IFM
ME
---- Abstract -----
We estimate the degree of 'stickiness' in aggregate consumption growth (sometimes interpreted as reflecting consumption habits) for thirteen advanced economies. We find that, after controlling for measurement error, consumption growth has a high degree of autocorrelation, with a stickiness parameter of about 0.7 on average across countries. The sticky-consumption-growth model outperforms the random walk model of Hall (1978), and typically fits the data better than the popular Campbell and Mankiw (1989) model. In several countries, the sticky-consumption-growth and Campbell-Mankiw models work about equally well.
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