This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Determinants of consumption smoothing

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
G. PEERSMAN ()
L. POZZI ()
Abstract

As is generally acknowledged, the failure of the perfect credit markets assumption underlying the permanent income hypothesis may be responsible for low consumption smoothing and observed excess sensitivity of consumption to current income. The economic literature puts forward a number of potential determinants of liquidity constraints. In this paper we investigate the relevance of these determinants by looking at their impact on household consumption smoothing. Applying a Kalman filter to a state-space version of our model, we find that excess sensitivity in the US is higher in recessions and depends positively on government debt and negatively on financial liberalization.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.FEB.UGent.be/fac/research/WP/Papers/wp_04_231.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 04/231.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 29 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:rug:rugwps:04/231

Contact details of provider:
Postal: Hoveniersberg 4, B-9000 Gent
Phone: ++ 32 (0) 9 264 34 61
Fax: ++ 32 (0) 9 264 35 92
Web page: http://www.feb.ugent.be/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Nathalie Verhaeghe).

Related research
Keywords: Private consumption liquidity constraints consumption smoothing excess sensitivity Kalman filter state-space models.

Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Graciela Kaminsky & Sergio Schmukler, 2003. "Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization," NBER Working Papers 9787, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Philippe BACCHETTA & Stefan GERLACH, 1997. "Consumption and Credit Constraints : International Evidence," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9707, Université de Lausanne, Faculté des HEC, DEEP.
    Other versions:
  3. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March. [Downloadable!] (restricted)
  4. Jappelli, Tullio & Pagano, Marco, 1989. "Consumption and Capital Market Imperfections: An International Comparison," American Economic Review, American Economic Association, vol. 79(5), pages 1088-1105, December. [Downloadable!] (restricted)
    Other versions:
  5. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization Of The Dynamic Effects Of Changes In Government Spending And Taxes On Output," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1329-1368, November. [Downloadable!] (restricted)
    Other versions:
  6. Kashyap, Anil K & Lamont, Owen A & Stein, Jeremy C, 1994. "Credit Conditions and the Cyclical Behavior of Inventories," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 565-92, August. [Downloadable!] (restricted)
    Other versions:
  7. Mankiw, N. Gregory, 1982. "Hall's consumption hypothesis and durable goods," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 417-425. [Downloadable!] (restricted)
  8. Gert Peersam & Frank Smets, 2002. "The industry effects of monetary policy in the Euro area," Working Paper Series 165, European Central Bank. [Downloadable!]
    Other versions:
  9. Gertler, Mark & Gilchrist, Simon, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 309-40, May. [Downloadable!] (restricted)
    Other versions:
  10. 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. [Downloadable!] (restricted)
    Other versions:
  11. Marjorie Flavin, 1985. "Excess Sensitivity of Consumption to Current Income: Liquidity Constraints or Myopia?," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 117-36, February. [Downloadable!] (restricted)
  12. Vermeulen, Philip, 2002. " Business Fixed Investment: Evidence of a Financial Accelerator in Europe," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(3), pages 217-35, July. [Downloadable!] (restricted)
    Other versions:
  13. Carroll, Christopher D, 1994. "How Does Future Income Affect Current Consumption?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 111-47, February. [Downloadable!] (restricted)
    Other versions:
  14. McKeirnan, Barbara, 1996. "Consumption and the credit market," Economics Letters, Elsevier, vol. 51(1), pages 83-88, April. [Downloadable!] (restricted)
  15. Lorenzo Pozzi & Freddy Heylen & Maarten Dossche, 2004. "Government Debt and Excess Sensitivity of Private Consumption: Estimates from OECD Countries," Economic Inquiry, Oxford University Press, vol. 42(4), pages 618-633, October. [Downloadable!] (restricted)
  16. Aiyagari, S. Rao & McGrattan, Ellen R., 1998. "The optimum quantity of debt," Journal of Monetary Economics, Elsevier, vol. 42(3), pages 447-469, October. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Maria J. Luengo-Prado, 2004. "Durables, Nondurables, Down Payments and Consumption Excesses," Macroeconomics 0408006, EconWPA. [Downloadable!]
    Other versions:
  2. Robert-Paul Berben & Teunis Brosens, 2005. "The Impact of Government Debt on Private Consumption in OECD Countries," DNB Working Papers 045, Netherlands Central Bank, Research Department. [Downloadable!]
  3. L. Pozzi, 2005. "Income uncertainty and aggregate consumption," Research series 200511-2, National Bank of Belgium. [Downloadable!]
Statistics
Access and download statistics

Did you know? All RePEc services are meant to be be free forever, as they are all run by volunteers.

This page was last updated on 2008-8-6.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.