empirical analysis of consumption behavior for selected European economies

This thesis first outlines the main theoretical approaches to the consumption function, such as the Absolute Income Hypothesis, the Relative Income Hypothesis, the Life-Cycle Hypothesis and the Permanent Income Hypothesis. Furthermore, it highlights the importance of expectations for consumption behavior and presents an econometric specification of the consumption function, utilizing the adaptive and rational expectations formation mechanisms. Important empirical issues regarding the inclusion of other determinants of consumption are also discussed. Finally, an econometric analysis of consumption for Greece, Germany, France, Italy and the United Kingdom is presented.