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Consumer Durables and Permanent Income

Hall (1978) introduced RE into the consumption function. See Muellbauer (1983) for UK use, Flavin (1981) for important extensions to Hall?s work and Pischke (1995) for more developments. Mankiw (1982) extends Hall?s models into expenditure on consumer durables.

the project is to estimate Mankiw?s model on either UK or US data, and compare them to the paper. When discussing the economics of the Mankiw model be clear about the role of the equation which links the stock of durables with the services that they provide. You should comment on comment on your finding with regard to Hall?s propositions.

This essay mainly focus on the following two parts:

1) Data and Econometric Modelling:
The essay is expected to estimate two models. The 1st model should be fairly close to, if not exactly the same as that achieved in the published paper, using an appropriate dataset, and techniques of the original researchers. The aim in model 1 is to reproduce the original results using STATA and will be scored accordingly. The two results should be presented in so as to mark comparisons.

The 2nd model should be by way of an appropriate extension of the 1st, and should be based on economic theory. This means it also has to be justified; no other constraint, except word count, is imposed.

it is advised however, that the degree of sophistication of the econometric techniques used is not, of itself, an appropriate extension. So using more complex techniques pa sec, is not enough for model 2 to be of especially high merit.

2) Results and Extensions:

The results should be clear and concise. They should show the results of the original study and of the two models. You are free to present the estimates generated in any manner that you feel appropriate, so long as clarity is not sacrificed. It is here that the merits of the particular extension chosen should be lauded.

about the needed appendix (excluded from the total words):

The 1st (required) appendix is the STATA.do file generated in the project. This should be able to reproduce (within reason) the results that have been included in the project. The 2nd appendix is devoted to the dataset and should provide details of where you obtained your dataset, and how it was composed, including and data cleansing protocols used as necessary.There are 4 references that I’ve mentioned in the description and I’ve uploaded. Here what I’m emphasizing is that the models in this essay are mainly based on the uploaded references. Please pay attention to the description of the order.

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