Private consumption and cyclical asymmetries in the euro area

Abstract

Experience after the establishment of EMU shows that the behaviour of private consumers differs considerably among member countries and that average and marginal propensities to consume are fairly heterogeneous. In particular, there are clear differences between Germany and the rest of the euro area. These asymmetric consumption functions may be responsible for cyclical divergences within the currency area. The following paper presents an econometric analysis of the available data.