The aggregate consumption function : an analysis, including an estimate of the Australian short-run consumption function, 1959-1969.

In recent years the debate as to the correct form of the aggregate consumption function has continued unabated. Research on the question has been stimulated by the increasing efforts to build up econometric models of national economies. Over the years these models have grown both in size (i.e. in the number of equations and variables employed) and complexity. However, the consumption function has remained an important relationship in these models. The continuing debate has now generated an exceedingly large literature, and it is the first aim of this thesis to review the more important contributions to this literature. Four chapters are devoted to this aim. The first deals with work based essentially upon the original formulation of the consumption function by Keynes, the second deals with Friedman's Permanent Income Hypothesis and the literature which that has inspired, while the final two chapters are given over to a discussion of wealth and the consumption function, including the Life Cycle Hypothesis of Ando, Modigliani and Brumberg. Research into the nature of the Australian consumption function has not kept pace with overseas work, and the resulting literature is small both in terms of the total number of studies and in terms of the number of successful overseas ideas that have been tried using Australian data. It is the second aim of this thesis to review the work on the Australian consumption function, and a conscientious effort has been made to collect together all available estimates.