# Why Is Consumption So Smooth?

 Title: Why Is Consumption So Smooth? Author: Deaton, Angus; Campbell, John Note: Order does not necessarily reflect citation order of authors. Citation: Campbell, John, and Angus Deaton. 1989. Why is consumption so smooth? Review of Economic Studies 56(3): 357-373. Full Text & Related Files: campbell_consumptionsmooth.pdf (353.2Kb; PDF) Abstract: For thirty years it has been accepted that consumption is smooth because permanent income is smoother than measured income. (This paper considers the evidence for the contrary position, that permanent income is in fact less smooth than measured income, so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory.) The paper argues that in postwar U.S. quarterly data, consumption is smooth because it responds with a lag to changes in income. Published Version: http://dx.doi.org/10.2307/2297552 Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3221494 Downloads of this work:

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