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Interrelations between Consumption and Wealth in Poland

Author

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  • Magdalena Zachłód-Jelec

    () (Polish Ministy of Finance)

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 on the basis of the cointegrating relation found in the system. 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. A tentative explanation of this finding is presented. 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.

Suggested Citation

  • Magdalena Zachłód-Jelec, 2010. "Interrelations between Consumption and Wealth in Poland," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 2(1), pages 37-58, January.
  • Handle: RePEc:psc:journl:v:1:y:2010:i:4:p:37-58
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    File URL: http://www.cejeme.pl/publishedarticles/2010-46-03-634244032047031250-3782.pdf
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    References listed on IDEAS

    as
    1. 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 971-987, December.
    2. 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.
    3. Sousa, Ricardo M., 2009. "Wealth effects on consumption: evidence from the euro area," Working Paper Series 1050, European Central Bank.
    4. Hamburg, Britta & Hoffmann, Mathias & Keller, Joachim, 2005. "Consumption, wealth and business cycles: why is Germany different?," Discussion Paper Series 1: Economic Studies 2005,16, Deutsche Bundesbank.
    5. Campbell, John Y, 1996. "Understanding Risk and Return," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 298-345, April.
    6. 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.
    7. Martin Lettau, 2001. "Consumption, Aggregate Wealth, and Expected Stock Returns," Journal of Finance, American Finance Association, vol. 56(3), pages 815-849, June.
    8. repec:fth:harver:1435 is not listed on IDEAS
    9. 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.
    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 1249-1273, November.
    11. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
    12. 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.
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    Citations

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    Cited by:

    1. Katarzyna Leszkiewicz Kędzior & Władysław Welfe, 2012. "Consumption function for Poland. Is life cycle hypothesis legitimate?," Bank i Kredyt, Narodowy Bank Polski, vol. 43(5).
    2. Mariusz Kapuściński, 2017. "Monetary policy and financial asset prices in Poland," Bank i Kredyt, Narodowy Bank Polski, vol. 48(3), pages 263-294.
    3. repec:nbp:nbpbik:v:43:y:2012:i:5:p:5-20 is not listed on IDEAS

    More about this item

    Keywords

    consumption; wealth; cointegration; Beveridge-Nelson decomposi- tion; impulse responses;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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