Testing the Optimality of Consumption Decisions of the Representative Household: Evidence from Brazil

• Autor(a) principal: Gesteira Costa, Marcos
• Data de Publicação: 2015
• Outros Autores: Carrasco-Gutierrez, Carlos Enrique
• Tipo de documento: Artigo
• Idioma: por
• Título da fonte: Revista Brasileira de Economia (Online)
• Texto Completo: https://periodicos.fgv.br/rbe/article/view/30037
• topic: CCAPM; rule of thumb; aggregate consumption; permanent income hypothesis; Euler equations.

This paper investigates whether there is a fraction of consumers that do not behave as fully forward-looking optimal consumers in the Brazilian economy. The generalized method of moments technique was applied to nonlinear Euler equations of the consumption-based capital assets model contemplating utility functions with time separability and non-separability. The results show that when the household utility function was modeled as constant relative risk aversion, external habits and Kreps-Porteus, estimates of the fraction of rule-of-thumb households was, respectively, 89%, 78% and 22%. According to this, a portion of disposable income goes to households who consume their current incomes in violation of the permanent income hypothesis.