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Unemployment and Consumption

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  • Malley, James R
  • Moutos, Thomas

Abstract

In this paper, the authors argue that the aggregate unemployment rate is a valuable measure of aggregate income uncertainty. According to the theory of precautionary saving, an increase in income uncertainty would be expected to increase saving. The authors use U.S. quarterly data on the consumption of motor vehicles first to examine whether unemployment has a negative effect on consumption and then to differentiate between the various explanations for this phenomenon. They conclude that the negative relationship between unemployment and consumption is due in large part to precautionary saving motives. Copyright 1996 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 48 (1996)
Issue (Month): 4 (October)
Pages: 584-600

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Handle: RePEc:oup:oxecpp:v:48:y:1996:i:4:p:584-600

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Cited by:
  1. Roberto Bande & Dolores Riveiro, 2012. "Private Saving Rates and Macroeconomic Uncertainty: Evidence from Spanish Regional Data," Documentos de trabajo - IRENe, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia 0004, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
  2. Pär Österholm & Erik Hjalmarsson, 2007. "Testing for Cointegration Using the Johansen Methodology When Variables Are Near-Integrated," IMF Working Papers, International Monetary Fund 07/141, International Monetary Fund.
  3. Saito, Makoto & Shiratsuka, Shigenori, 2003. "Precautionary Motives versus Waiting Options: Evidence from Aggregate Household Saving in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(3), pages 1-20, October.
  4. Roberto Bande & Dolores Riveiro, 2012. "The Consumption-Investment-Unemployment Relationship in Spain: An Analysis with Regional Data," Documentos de trabajo - IRENe, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia 0003, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
  5. Baxter, J. L. & Moosa, I. A., 1996. "The consumption function: A basic needs hypothesis," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 31(1), pages 85-100, October.
  6. Sarantis, Nicholas & Stewart, Chris, 2003. "Liquidity constraints, precautionary saving and aggregate consumption: an international comparison," Economic Modelling, Elsevier, Elsevier, vol. 20(6), pages 1151-1173, December.
  7. Jürgen Arns & Kaushik Bhattacharya, 2005. "Modelling Aggregate Consumption Growth with Time-Varying Parameters," Bonn Econ Discussion Papers, University of Bonn, Germany bgse15_2005, University of Bonn, Germany.
  8. Claudio Soto G., 2004. "Desempleo y Consumo en Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, Central Bank of Chile, vol. 7(1), pages 31-50, April.
  9. Bergman, Michael, 2000. "The 'Expansionary Fiscal Contraction Hypothesis' and Uncertainty About the Permanence of Fiscal Consolidations," Working Papers, Lund University, Department of Economics 2000:2, Lund University, Department of Economics.
  10. Erik Hjalmarsson & Pär Österholm, 2010. "Testing for cointegration using the Johansen methodology when variables are near-integrated: size distortions and partial remedies," Empirical Economics, Springer, Springer, vol. 39(1), pages 51-76, August.
  11. Claudio Soto, 2004. "Unemployment and Consumption in Chile," Working Papers Central Bank of Chile, Central Bank of Chile 258, Central Bank of Chile.
  12. Garz, Marcel, 2014. "Consumption, labor income uncertainty, and economic news coverage," MPRA Paper 56076, University Library of Munich, Germany.

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