Investigating the Rule-of-Thumb in Consumption by GMM Approach in Iran

Subject Areas : Labor and Demographic Economics

reza roshan ¹ , mosaieb pahlevani ² , mohamadnabi shahiki tash ³

1 - دکتری اقتصاد دانشگاه سیستان و بلوچستان
2 - دانشیار اقتصاد دانشگاه سیستان و بلوچستان
3 - استادیار اقتصاد دانشگا سیستان و بلوچستان

Received: 2013-10-15 Accepted : 2014-02-10 Published : 2014-03-01

Keywords: C26, D91, G11,

Abstract :

This paper reveals how many percent of Iranian households consume 100 percent of their current income or apply rule-of-thumb in consumption. To get the goal, Epstein-Zin utility function thereby will separate the elasticity of inter-temporal substitution and relative risk aversion. Then, the coefficient of rule-of-thumb in consumption will be estimated during 1980-2012 by using Generalized Method of Moments (GMM). Results indicate that about 26.5 percent of the Iranian households represent rule-of-thumb behavior, but the restact based on PIH and have inter-temporal consumption plan. Also, the coefficient of risk aversion for the consumption of Iranian households is about 8-22 percent.

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