In a country prone to currency crises and great changes in relative prices, the prevailing paradigm cannot fully explain consumption behavior. To tackle this problem, a small open economy model with optimizing agents is used. In an open economy the fundamentals of private consumption appear to be: domestic product, net foreign assets income, relative tradable/nontradable productivity, and terms of trade. Considering these fundamentals and using multicointegration techniques, this paper analyzes
JEL Classification Numbers: E21, F41, D11, C32