On the Stability of the Wealth Effect
AbstractEvidence of instability of the wealth effect in the USA is presented through the estimation of a Markov switching model of the long-run aggregate consumption function. The dating of the regimes appears to bear relation to movements in asset prices. A model-based explanation of the findings is suggested, highlighting the importance of the short-run relation between consumption, income and wealth in explaining the estimated long-run coefficients.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2005-17.
Length: 20 pages
Date of creation: 2005
Date of revision:
Contact details of provider:
Postal: Av. Dias da Silva, 165, 3004-512 COIMBRA
Phone: + 351 239 790 500
Fax: +351 239 403511
Web page: http://gemf.fe.uc.pt/index_en.htm
More information through EDIRC
Parameter instability; Markov switching; Consumption; Wealth effect.;
Other versions of this item:
- Pedro BaÃ§Ã£o & Fernando Alexandre & Vasco J. Gabriel, 2006. "On the stability of the wealth effect," Computing in Economics and Finance 2006 281, Society for Computational Economics.
- Fernando Alexandre & Pedro Bação & Vasco J. Gabriel, 2005. "On the Stability of the Wealth Effect," School of Economics Discussion Papers 1405, School of Economics, University of Surrey.
- Fernando Alexandre & Pedro Bação & Vasco J. Gabriel, 2005. "On the Stablity of the Wealth Effect," NIPE Working Papers 14/2005, NIPE - Universidade do Minho.
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fernando Alexandre & Vasco J. Gabriel & Pedro Bação, 2007.
"The Consumption-Wealth Ratio Under Asymmetric Adjustment,"
NIPE Working Papers
15/2007, NIPE - Universidade do Minho.
- Gabriel Vasco J. & Alexandre Fernando & Bação Pedro, 2008. "The Consumption-Wealth Ratio under Asymmetric Adjustment," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 12(4), pages 1-32, December.
- Vasco Gabriel & Fernando Alexandre & Pedro Bação, 2007. "The Consumption-Wealth Ratio Under Asymmetric Adjustment," GEMF Working Papers 2007-06, GEMF - Faculdade de Economia, Universidade de Coimbra.
- Sydney Ludvigson & Charles Steindel, 1998.
"How important is the stock market effect on consumption?,"
9821, Federal Reserve Bank of New York.
- Sydney Ludvigson & Charles Steindel, 1999. "How important is the stock market effect on consumption?," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 29-51.
- Sydney Ludvigson & Martin Lettau, 1999.
"Consumption, aggregate wealth and expected stock returns,"
77, Federal Reserve Bank of New York.
- Martin Lettau, 2001. "Consumption, Aggregate Wealth, and Expected Stock Returns," Journal of Finance, American Finance Association, vol. 56(3), pages 815-849, 06.
- Lettau, Martin & Ludvigson, Sydney, 1999. "Consumption, Aggregate Wealth and Expected Stock Returns," CEPR Discussion Papers 2223, C.E.P.R. Discussion Papers.
- Hansen, Bruce E, 1992.
"Tests for Parameter Instability in Regressions with I(1) Processes,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 10(3), pages 321-35, July.
- Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 45-59, January.
- Yash P. Mehra, 2001. "The wealth effect in empirical life-cycle aggregate consumption equations," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 45-67.
- John Y. Campbell & N. Gregory Mankiw, 1990.
"Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence,"
NBER Working Papers
2924, National Bureau of Economic Research, Inc.
- 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.
- Carrasco, Marine, 2002. "Misspecified Structural Change, Threshold, and Markov-switching models," Journal of Econometrics, Elsevier, vol. 109(2), pages 239-273, August.
- James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 99-118, Spring.
- Hall, Stephen G & Psaradakis, Zacharias & Sola, Martin, 1997. "Cointegration and Changes in Regime: The Japanese Consumption Function," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(2), pages 151-68, March-Apr.
- Blandina Oliveira & Adelino Fortunato, 2008.
"The dynamics of the growth of firms: evidence from the services sector,"
Springer, vol. 35(3), pages 293-312, July.
- Blandina Oliveira & Adelino Fortunato, 2005. "The Dynamics of the Growth of Firms: Evidence from the Services Sector," GEMF Working Papers 2005-04, GEMF - Faculdade de Economia, Universidade de Coimbra.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sara Santos).
If references are entirely missing, you can add them using this form.