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A note on the average propensity to consume, wealth and threshold adjustment

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Listed author(s):
  • Holmes, Mark J.
  • Shen, Xin

Abstract

We explore the connection between the average propensity to consume (APC) and wealth to income ratio (WY) in the US. We find evidence of a long-run relationship characterised by threshold error correction. It is the APC that responds to long-run disequilibrium where the speed of adjustment is asymmetric insofar as being most likely fastest in regimes characterised by a high APC and low WY.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264999313002733
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 35 (2013)
Issue (Month): C ()
Pages: 309-313

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Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:309-313
DOI: 10.1016/j.econmod.2013.07.008
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

Keywords: Threshold error correction; Average propensity to consume; Wealth;

Find related papers by JEL classification:

  • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
  • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
  • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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Cited by:

  1. Mark J. HOLMES & Xin SHEN, 2015. "On Wealth Volatility, Asymmetries And The Average Propensity To Consume In The United States," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 15(1), pages 69-78.

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