Arbeitspapier
Liquidity constraints versus loss aversion in household consumption: a simple reconciliation
Various deviations from the Permanent Income consumption model with rational expectations have been discussed in the literature, including loss aversion and liquidity constraints. In the existing literature, these two types of consumption asymmetry are usually considered as mutually exclusive. Using a single data set for US personal consumption, income and wealth for the period 1953q1-2007q3, we show that evidence of either loss aversion or liquidity constraints can indeed be produced, depending on the theoretical and econometric framework applied. We then apply a synthetic asymmetric error correction model that distinguishes short-run and long-run asymmetries and helps reconcile the conflicting results from the previous literature. Our findings can also be interpreted in the context of the secular decline in the US personal savings rate before the outbreak of the financial crisis in 2007.
- Language
-
Englisch
- Bibliographic citation
-
Series: IMK Working Paper ; No. 13/2010
- Classification
-
Wirtschaft
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Consumer Economics: Theory
Consumer Economics: Empirical Analysis
Macroeconomics: Consumption; Saving; Wealth
- Subject
-
Asymmetric error correction model
consumer economics
aggregate consumption and wealth
Einkommenshypothese
Liquiditätsbeschränkung
Risikoaversion
Gesamtwirtschaftlicher Konsum
Vermögen
Sparen
Schätzung
USA
- Event
-
Geistige Schöpfung
- (who)
-
van Treeck, Till
- Event
-
Veröffentlichung
- (who)
-
Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK)
- (where)
-
Düsseldorf
- (when)
-
2010
- Handle
- URN
-
urn:nbn:de:101:1-201101312921
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- van Treeck, Till
- Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK)
Time of origin
- 2010
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