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A note on the average propensity to consume, wealth and threshold adjustment

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  • Holmes, Mark J.
  • Shen, Xin

Abstract

We explore the connection between the average propensity to consume (APC) and wealth to income ratio (WY) in the US. We find evidence of a long-run relationship characterised by threshold error correction. It is the APC that responds to long-run disequilibrium where the speed of adjustment is asymmetric insofar as being most likely fastest in regimes characterised by a high APC and low WY.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264999313002733
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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 35 (2013)
Issue (Month): C ()
Pages: 309-313

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Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:309-313

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Threshold error correction; Average propensity to consume; Wealth;

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