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Interrelations between Consumption and Wealth in Poland

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Author Info

  • Magdalena Zachłód-Jelec

    ()
    (Polish Ministy of Finance)

Abstract

This paper studies the long-run relationship between consumption, labour income and asset wealth in Poland. Within cointegrated VAR model dynamic responses of the variables in the system to shocks are studied. In addition, series are decomposed into permanent and transitory components on the basis of the cointegrating relation found in the system. Main conclusion of this paper is that deviations of the three variables from their estimated long-run relationship are better explained with fluctuations of labour income than assets. A tentative explanation of this finding is presented. Additionally, the magnitude of the asset wealth effect in Poland is calculated and compared with other studies for European countries and for the U.S.

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File URL: http://www.cejeme.pl/publishedarticles/2010-46-03-634244032047031250-3782.pdf
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Bibliographic Info

Article provided by CEJEME in its journal Central European Journal of Economic Modelling and Econometrics.

Volume (Year): 2 (2010)
Issue (Month): 1 (January)
Pages: 37-58

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Handle: RePEc:psc:journl:v:1:y:2010:i:4:p:37-58

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Web page: http://cejeme.org/

Related research

Keywords: consumption; wealth; cointegration; Beveridge-Nelson decomposi- tion; impulse responses;

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References

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  1. Donald Robertson & Anthony Garratt & Stephen Wright, 2006. "Permanent vs transitory components and economic fundamentals," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(4), pages 521-542.
  2. Fernandez-Corugedo, Emilio & Price, Simon & Blake, Andrew P., 2007. "The dynamics of aggregate UK consumers' non-durable expenditure," Economic Modelling, Elsevier, vol. 24(3), pages 453-469, May.
  3. Sousa, Ricardo M., 2009. "Wealth effects on consumption: evidence from the euro area," Working Paper Series 1050, European Central Bank.
  4. John Y. Campbell, 1986. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," NBER Working Papers 1805, National Bureau of Economic Research, Inc.
  5. repec:fth:harver:1435 is not listed on IDEAS
  6. Hayashi, Fumio, 1982. "The Permanent Income Hypothesis: Estimation and Testing by Instrumental Variables," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 895-916, October.
  7. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
  8. Sydney Ludvigson & Martin Lettau, 1999. "Consumption, aggregate wealth and expected stock returns," Staff Reports 77, Federal Reserve Bank of New York.
  9. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246 National Bureau of Economic Research, Inc.
  10. John Y. Campbell, 1993. "Understanding Risk and Return," NBER Working Papers 4554, National Bureau of Economic Research, Inc.
  11. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
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Cited by:
  1. Katarzyna Leszkiewicz Kędzior & Władysław Welfe, 2012. "Consumption function for Poland. Is life cycle hypothesis legitimate?," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 43(5).
  2. repec:nbp:nbpbik:v:43:y:2012:i:5:p:5-20 is not listed on IDEAS

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