Arbeitspapier
Asymmetric income and wealth effects in a non-linear error correction model of US consumer spending
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, 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 propose a synthetic asymmetric error correction model and find evidence that can be interpreted as indicating both long-run loss aversion and short-run liquidity constraints. This result can also be interpreted in the context of the secular decline in the US personal savings rate over the past decades: although wealth declines can have considerable negative consumption effects in the short run, households have apparently been able, in the longer run, to substantially increase consumption expenditure following income and wealth increases, but to keep the necessary reductions in consumer spending, as a consequence of income and wealth declines, within relatively small limits. Yet, given increasing personal indebtedness, this asymmetric consumption pattern may be unsustainable
- Sprache
-
Englisch
- Erschienen in
-
Series: IMK Working Paper ; No. 06/2008
- Klassifikation
-
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
- Thema
-
Asymmetric error correction model
consumer economics
aggregate con-sumption and wealth.
- Ereignis
-
Geistige Schöpfung
- (wer)
-
van Treeck, Till
- Ereignis
-
Veröffentlichung
- (wer)
-
Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK)
- (wo)
-
Düsseldorf
- (wann)
-
2008
- Handle
- URN
-
urn:nbn:de:101:1-20080818157
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- van Treeck, Till
- Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK)
Entstanden
- 2008
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