01723cas a2200241 a 4500 AALejournalIMF008327 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451946130 1018-5941 BD-DhAAL BD-DhAAL Tersman, Gunnar. The Volatility of Consumption in a Simple General Equilibrium Model / Gunnar Tersman. Washington, D.C. : International Monetary Fund, 1992. 1 online resource (34 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper studies the volatility of consumption relative to output in the context of a simple general equilibrium model of a small open economy subject to exogenous shocks in productivity. With infinite horizons and exogenous relative prices, the model generates variance estimates that are well above what can be observed in empirical data. While finite horizons and endogenous terms of trade reduce the volatility of consumption, the model fails to generate sufficient serial correlation with respect to the consumption growth rate. If the household's decision problem is modified to take into account durability and adjustment costs, the model does well on both dimensions. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1992/109 Full text available on IMF http://elibrary.imf.org/view/journals/001/1992/109/001.1992.issue-109-en.xml IMF e-Library