The Spirit of Capitalism, Precautionary Savings, and Consumption
Recent research has shown that the "spirit of capitalism"¡ªa preference for wealth itself, in addition to consumption¡ªhas important implications for growth and asset pricing. This paper explores how the spirit of capitalism affects saving and consumption behavior. We demonstrate that the spirit of capitalism may reduce the importance of precautionary savings. It can also explain the excess sensitivity puzzle: the spirit of capitalism causes dramatic deviations from a random walk. It may also offer a partial explanation of the excess smoothness puzzle.
|Date of creation:||08 Nov 2006|
|Date of revision:|
|Publication status:||Published in Journal of Money, Credit and Banking, Volume 41, Issue 2-3, pages 543¨C554, March-April 2009|
|Contact details of provider:|| Web page: http://cema.cufe.edu.cn/|
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