Persistence in Consumption Across Europe: Evidence Using Fractional Integration

Abstract

This paper employs fractional integration methods to investigate the degree of persistence in consumption in a group of 33 European countries using data on annual final consumption expenditure of households and non-profit institutions serving households for the period 1960-2021. The results show no evidence of mean reversion in consumption levels over time, as all the series are fractionally integrated. This indicates very high levels of persistence. Special attention should be paid to several southern European countries, which present some of the highest degrees of integration. This suggests that shocks or changes in the consumption levels in these economies, whether positive or negative, tend to have a more enduring impact compared to other parts of Europe.