Excess Sensitivity and Asymmetries in Consumption: an Empirical Investigation
AbstractMost empirical studies on liquidity constraints classify a consumer as being constrained on the basis of a single indicator such as the asset to income ratio. In this analysis, we model the probability that a consumer faces liquidity constraints as a function of multiple social and economic factors. This probability function is estimated simultaneously with the degree of excess sensitivity of consumption to income in a switching regressions framework. The switching regressions apply optimal weights to the densities for the Euler equations on the two states and are less susceptible to sample misclassification. We are also able to use exclusion restrictions on the Euler equations for the constrained and the unconstrained individuals to discriminate between excess sensitivity due to liquidity constraints, from that due to myopic behaviour and a certain type of time non-separable preferences. Our results based on data from the CEX confirm that liquidity constrained consumers are excessively sensitive to variables already known to economic agents. However, there is evidence that the unconstrained consumers also exhibit behaviour that is consistent with the theoretical predictions. Further analysis suggests that such behaviour could be explained by time non-separable preferences. La plupart des Ã©tudes empiriques sur les contraintes de liquiditÃ© dÃ©terminent si un consommateur est contraint en fonction d'un indicateur unique comme le ratio des actifs sur le revenu. Dans la prÃ©sente analyse, nous modÃ©lisons la probabilitÃ© qu'un consommateur subisse des contraintes de liquiditÃ© comme une fonction de plusieurs facteurs Ã©conomiques et sociaux. Cette fonction de probabilitÃ© est estimÃ©e simultanÃ©ment avec le degrÃ© de sensibilitÃ© excessive de la consommation au revenu dans un cadre de rÃ©gressions Ã changement de rÃ©gime. Les rÃ©gressions Ã changement de rÃ©gime appliquent des poids optimaux aux densitÃ©s des Ã©quations d'Euler dans les deux Ã©tats et sont moins sus
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Bibliographic InfoPaper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 9511.
Length: 23 pages
Date of creation: 1995
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Other versions of this item:
- Garcia, Rene & Lusardi, Annamaria & Ng, Serena, 1997. "Excess Sensitivity and Asymmetries in Consumption: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 154-76, May.
- René Garcia & Annamaria Lusardi & Serena Ng, 1995. "Excess Sensitivity and Asymmetries in Consumption: An Empirical Investigation," CIRANO Working Papers 95s-09, CIRANO.
- Garcia, R. & Lusardi, A. & Ng, S., 1995. "Excess Sensitivity and Asymmetries in Consumption: An Empirical Investigation," Cahiers de recherche 9511, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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