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Thick modelling income and wealth effects: a forecast application to euro area private consumption

Author

Listed:
  • Gabe Jacob de Bondt

    (European Central Bank)

  • Arne Gieseck

    (European Central Bank)

  • Zivile Zekaite

    (Central Bank of Ireland)

Abstract

This study develops a thick modelling tool for real private consumption, with a conditional forecasting application to the euro area. Several equations from thousands of error correction models, always including labour income, non-labour income, financial wealth and non-financial wealth as determinants, are selected from predetermined in-sample and out-of-sample criteria. Our thick model estimates show that income effects differ between labour and non-labour income and that their (relative) importance varies over time. This implies that labour and non-labour income should both be on the radar of policy makers and modellers.

Suggested Citation

  • Gabe Jacob de Bondt & Arne Gieseck & Zivile Zekaite, 2020. "Thick modelling income and wealth effects: a forecast application to euro area private consumption," Empirical Economics, Springer, vol. 58(1), pages 257-286, January.
    • Handle: RePEc:spr:empeco:v:58:y:2020:i:1:d:10.1007_s00181-019-01738-w
    DOI: 10.1007/s00181-019-01738-w
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    4. Konstantina Manou & Panagiotis Palaios & Evangelia Papapetrou, 2021. "Housing wealth, household debt, and financial assets: Are there implications for consumption?," Empirical Economics, Springer, vol. 61(3), pages 1253-1279, September.

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    More about this item

    Keywords

    Thick modelling; Private consumption; Income; Wealth;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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