Why is Consumption So Smooth?
Year: 1989
Type: article
Abstract: For thirty years it has been accepted that consumption is smooth because permanent income is smoother than measured income. This paper considers the evidence for the contrary position, that permanent income is in fact less smooth than measured income, so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory. The paper argues that in postwar U.S. quarterly data, consumption is smooth because it responds with a lag to changes in income.
Source: The Review of Economic Studies
DOI: 10.2307/2297552
Authors: John Campbell, Angus Deaton
Institutions: National Bureau of Economic Research, Princeton University
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1493652738