Some New Evidence on the Timing of Consumption Decisions and on Their Generating Process

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Abstract
While quarterly consumption data are known to be well fitted by an integrated first-order moving average process--IMA(1,1)--with a positive coefficient, monthly consumption data are found to be well fitted by an IMA(1,1) process with negative coefficient. Without measurement errors, one implication is that, if Hall's random walk model of consumption behavior is true, then agents' decision interval must be greater than a month. (In particular, this evidence rejects the possibility of continuously taken decisions.) Another implication is that, if consumption decisions are generated by an IMA(1,1) process at intervals shorter than a month, the coefficient must be negative. The paper also discusses the case of monthly data corrupted by measurement errors.

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