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Interrelations between consumption and wealth in Poland

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  • Magdalena Zachłod-Jelec

    ()
    (Ministry of Finance, Poland)

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. 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. The paper offers a tentative explanation of this finding. 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.mf.gov.pl/_files_/euro/publikacje_naukowe/working_papers/mf_wp_2.pdf
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Bibliographic Info

Paper provided by Ministry of Finance in Poland in its series Working Papers with number 2.

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Length: 27 pages
Date of creation: 07 Jan 2010
Date of revision:
Handle: RePEc:fpo:wpaper:2

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Web page: http://www.mf.gov.pl
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Related research

Keywords: wealth; cointegration; Beveridge-Nelson decomposition; impulse responses;

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References

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  1. Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, vol. 55(6), pages 1249-73, November.
  2. repec:fth:harver:1435 is not listed on IDEAS
  3. Ricardo M. Sousa, 2009. "Wealth Effetcs on Consumption: Evidence from the euro area," NIPE Working Papers 12/2009, NIPE - Universidade do Minho.
  4. 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.
  5. 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.
  6. 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.
  7. John Y. Campbell, 1993. "Understanding Risk and Return," NBER Working Papers 4554, National Bureau of Economic Research, Inc.
  8. 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.
  9. 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.
  10. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
  11. Lettau, Martin & Ludvigson, Sydney, 1999. "Consumption, Aggregate Wealth and Expected Stock Returns," CEPR Discussion Papers 2223, C.E.P.R. Discussion Papers.
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Cited by:
  1. repec:nbp:nbpbik:v:43:y:2012:i:5:p:5-20 is not listed on IDEAS
  2. 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).

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