Hall's consumption hypothesis and durable goods N. Gregory Mankiw
Massachusetts Institute of Technology, Cambridge, MA 02139, USA
Available online 1 April 2002.
AbstractHall shows that consumption obeys an AR(1) process if the life cycle-permanent income hypothesis is true. This paper expands Hall's framework to show that expenditure on durable goods should be ARMA(1, 1) but not AR(1). Post-war U.S. data rejects the expanded model.