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Determinants of the Consumption Function in Croatia

Josip Tica orcid id orcid.org/0000-0001-7937-1573 ; Faculty of Economics and Business, University of Zagreb
Mate Rosan


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Abstract

The goal of this paper is to use Croatian data in order to estimate Modigliani's consumption function which incorporates wealth effects together with income effects. We use available quarterly data spanning from 1997 in order to perform Johansen cointegration technique. We use national disposable income and total net wage bill as proxies for income effect and CROBEX, hedonic housing index, net financial wealth and net savings of private sector as proxies for wealth effect. Results have indicated that it is possible to find statistical evidence of existence of both effects in Croatian data and that estimates for income effect look much more robust compared to wealth effect estimates. Therefore, major implication of this result is that we should not ignore wealth effects in education process as well as in discussions of economic policy or economic research.

Keywords

consumption function; multiplication; wealth effect; quantitative easing

Hrčak ID:

136623

URI

https://hrcak.srce.hr/136623

Publication date:

28.11.2014.

Article data in other languages: croatian

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