Euler consumption equation with non-separable preferences over consumption and leisure and collateral constraints

Arbeitspapier

This paper derives and estimates an aggregate Euler consumption equation which allows one to compare the importance of collateral constraints and non-separability of consumption and leisure as alternative sources of excess sensitivity of consumption to current income. Estimation results suggest that during a severe financial distress both non-separability and collateral constraints are needed to capture excess sensitivity of consumption to current economic conditions. During more tranquil times, evidence on collateral effects is more limited and non-separability is sufficient to make the Euler consumption equation agree well with the data.

Object Details

• ISBN: 978-952-462-501-2
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Finland Research Discussion Papers ; No. 9/2009

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy
• Subject: housing ; financial distress ; excess sensitivity of consumption

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kilponen, Juha
• Event: Veröffentlichung
• (who): Bank of Finland
• (where): Helsinki
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/212130
• Last update: 10.03.2025, 11:42 AM CET