The motivation for this is the substantial autonomous fluctuations in UK consumption at the business cycle and seasonal frequencies as well as the influence of demographics on preferences. Our explicit treatment of seasonality means that ours is the first valid test of whether consumption responds appropriately to either income or taste shocks. Further, our ability to test the model against both income and taste shocks provides an extra dimension with which to interpret the data. We find that consumption is excessively smooth to both forms of shocks but only at the non-seasonal frequencies.
Responsibility remains with the author.