Excess Sensitivity and Asymmetries in Consumption: An Empirical Investigation
Most empirical studies on liquidity constraints classify a consumer as being constrained on the basis of a single indicator such as the asset to income ratio. In this analysis, we model the probability that a consumer faces liquidity constraints as a function of multiple social and economic factors. This probability function is estimated simultaneously with the degree of excess sensitivity of consumption to income in a switching regressions framework. The switching regressions apply optimal weights to the densities for the Euler equations on the two states and are less susceptible to sample misclassification. We are also able to use exclusion restrictions on the Euler equations for the constrained and the unconstrained individuals to discriminate between excess sensitivity due to liquidity constraints, from that due to myopic behaviour and a certain type of time non-separable preferences. Our results based on data from the CEX confirm that liquidity constrained consumers are excessively sensitive to variables already known to economic agents. However, there is evidence that the unconstrained consumers also exhibit behaviour that is consistent with the theoretical predictions. Further analysis suggests that such behaviour could be explained by time non-separable preferences. La plupart des études empiriques sur les contraintes de liquidité déterminent si un consommateur est contraint en fonction d'un indicateur unique comme le ratio des actifs sur le revenu. Dans la présente analyse, nous modélisons la probabilité qu'un consommateur subisse des contraintes de liquidité comme une fonction de plusieurs facteurs économiques et sociaux. Cette fonction de probabilité est estimée simultanément avec le degré de sensibilité excessive de la consommation au revenu dans un cadre de régressions à changement de régime. Les régressions à changement de régime appliquent des poids optimaux aux densités des équations d'Euler dans les deux états et sont moins susceptibles d'erreurs de
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||1995|
|Date of revision:|
|Contact details of provider:|| Postal: C.P. 6128, Succ. centre-ville, Montréal (PQ) H3C 3J7|
Phone: (514) 343-6557
Fax: (514) 343-7221
Web page: http://www.cireq.umontreal.ca
More information through EDIRC
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.:
- Attanasio, Orazio P., 1995.
"The intertemporal allocation of consumption: theory and evidence,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 42(1), pages 39-56, June.
- Orazio P. Attanasio, 1994. "The Intertemporal Allocation of Consumption: Theory and Evidence," NBER Working Papers 4811, National Bureau of Economic Research, Inc.
- Bowman, David & Minehart, Debby & Rabin, Matthew, 1993.
"Loss Aversion in a Savings Model,"
Department of Economics, Working Paper Series
qt0gf4p3ts, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Eberly, J.C., 1990.
"Adjustment of Consumers'durables Stocks: Evidence from Automobile Purchases,"
Weiss Center Working Papers
22-91, Wharton School - Weiss Center for International Financial Research.
- Eberly, Janice C, 1994. "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 403-36, June.
- Janice C. Eberly, . "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Rodney L. White Center for Financial Research Working Papers 22-91, Wharton School Rodney L. White Center for Financial Research.
- A. Abel, 2010.
"Asset prices under habit formation and catching up with the Jones,"
Levine's Working Paper Archive
1395, David K. Levine.
- Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
- Abel, A.B., 1990. "Asset Prices Under Habit Formation And Catching Up With The Joneses," Weiss Center Working Papers 1-90, Wharton School - Weiss Center for International Financial Research.
- Andrew B. Abel, . "Asset Prices Under Habit Formation and Catching Up With the Jones," Rodney L. White Center for Financial Research Working Papers 1-90, Wharton School Rodney L. White Center for Financial Research.
- Andrew B. Abel, . "Asset Prices Under Habit Formation and Catching Up With the Jones," Rodney L. White Center for Financial Research Working Papers 01-90, Wharton School Rodney L. White Center for Financial Research.
- Andrew B. Abel, 1990. "Asset Prices under Habit Formation and Catching up with the Joneses," NBER Working Papers 3279, National Bureau of Economic Research, Inc.
- Orazio P. Attanasio & Martin Browning, 1993.
"Consumption over the Life Cycle and over the Business Cycle,"
NBER Working Papers
4453, National Bureau of Economic Research, Inc.
- Attanasio, Orazio P & Browning, Martin, 1995. "Consumption over the Life Cycle and over the Business Cycle," American Economic Review, American Economic Association, vol. 85(5), pages 1118-37, December.
- Attanasio, O.P. & Browning, M.J., 1993. "Consumption over the life cycle and over the business cycle," Discussion Paper 1993-14, Tilburg University, Center for Economic Research.
- Attanasio, O.P. & Browning, M., 1993. "Consumption Over the Life Cycle and Over the Business Cycle," Papers 9314, Tilburg - Center for Economic Research.
- Joseph G. Altonji & Aloysius Siow, 1987.
"Testing the Response of Consumption to Income Changes with (Noisy) Panel Data,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 102(2), pages 293-328.
- Joseph G. Altonji & Aloysius Siow, 1986. "Testing the Response of Consumption to Income Changes with (Noisy) PanelData," NBER Working Papers 2012, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:mtl:montec:9511. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sharon BREWER)
If references are entirely missing, you can add them using this form.