Cross Country Evidence on Consumption Persistence

Abstract

The main focus of this article is the detectionand measurement of the level of persistence in aggregateand disaggregate private consumption in Italy, Norwayand the United Kingdom. Using a non-parametricmethodology, we conclude that the presence of asignificant degree of persistence in aggregate anddisaggregate consumption in those three countriescannot be rejected.These results are essential from a policy point of view.Persistence in consumption does exist and cannot beignored, whether the goal is to stabilize the level of outputvia consumption or to boost output via long-lastingincreases in consumption. One instrument that might beuseful in addressing this issue is interest rates.