This paper integrates seemingly disjoint studies on consumer behavior in micro and macroanalyses via an intertemporal two-stage budgeting procedure with durable goods and liquidity constraints. The model specifies an indirect utility function as a function of nondurable consumption, commodity (nondurables) prices, and durables stock, and derives the demand functions for nondurable goods. A demand function for durable goods is derived in an adjustment cost framework. The consumption growth equation accounts for relative price effects with precautionary saving, durables stock, and liquidity constraints. The stochastic discount factor is approximated by a time-varying linear function of nondurable consumption growth, commodity price growth, durables stock growth, and disposable income growth. The demand functions for six nondurable goods and services are jointly estimated with the Euler equations for bonds, stocks, and durable goods with allowance for liquidity constraints, using US data. Estimation provides new findings for intertemporal consumption and a multifactor consumption-based capital asset pricing model.

A new procedure is proposed for re-examining the assumption of additivity of preferences over time which, although untenable, is usually maintained in intertemporal analyses of consumption and labour supply. The method is an extension of a famous work by Browning (1991). However, it is more general in permitting the estimation of Frisch demands, which are explicit in an unobservable variable (price of utility), but may lack a closed form representation in terms of observable variables such as prices and total outlay. It also makes an extensive use of duality theory to solve the endogeneity problem encountered in Browning ' s study. Applying this method with an appropriate estimator to the Australian disaggregate data, we find that the intertemporal additivity hypothesis is decisively rejected, which is consistent with Browning ' s conclusion. Results also indicate that the effects of lagged and future prices in determining current consumption decisions are insubstantial.JEL Classification System-Numbers: D11, D12, D91.

In this study, meat and fish consumption is depicted in the form of inverse demand systems taking into consideration the intertemporal consumption behavior presented in the data. The concept of intertemporal two-stage budgeting process is applied to this system which explicitly incorporates intertemporal consumption behavior as summarized by the Euler equation. Results based on Korean meat and fish products indicate that the proposed method is promising. Furthermore, the prices of meat and fish are quantity inflexible while the prices of beef and pork are sensitive to changes in consumption scale.JEL classifications: D9, D11, D12

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Mixed demand systems have been virtually ignored in empirical work solely because derivation of these systems requires closed forms for both direct and indirect utility functions. This article proposes the alternative of using a conditional cost function to generate empirical mixed demand models. This approach allows the estimation of mixed demand systems, which are explicit in an unobservable variable (utility), but may lack a closed form representation in terms of observable variables such as prices, quantities and expenditure. Results indicate that this approach is operationally feasible, which opens up a wider range of mixed demand specifications in static analyses. Copyright 2007, Oxford University Press.