Per Capita Personal Consumption

This example examines per capita personal consumption expenditure (PPCE) in relation to per capita disposable income (PPDI) in the United States for the period 1970-1999, all data in chained 1996 dollars. As an illustration of the Koyck model, consider the data given in Table 17.2. Regression of PPCE on PPDI and lagged PPCE gave the following results:

1242.169 + 0.6033PPDI( + 0.4106PPCE(-1 (402.5784) (0.1502) (0.1546)

Note: The calculation of Durbin h is discussed in Section 17.10.

If we assume that this model resulted from a Koyck-type transformation, k is 0.4106. The median lag is:

and the mean lag is:

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