Persistence in Consumption Across Europe: Evidence Using Fractional Integration

The process of transition and growth in Central and Eastern Europe (CEE) provides interesting insights, considering the countries' historical relationship with the Soviet Union. The 20 years after the Eastern enlargement of the European Union show an integrative power within the Single Market. However, due to the complex development paths of CEE countries, the question regarding the factors influencing their economic performance arises. This paper considers the innovation and institutional factors, e.g. innovation system performance, institutional development and political practices, that influence the economic development of CEE countries. It also looks at the differences in the effects of these factors. The analysis is performed for 37 European countries for the period from 2000 to 2020. The results reveal the importance of innovation and institutional factors, which may have special implications for the development of non-EU CEE countriesThis 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.