Testing Full Consumption Insurance in the Frequency Domain
Full consumption insurance implies that consumers are able to perfectly share risk by equalizing state by state their inter-temporal marginal rates of substitution in the presence of idiosyncratic endowment shocks. In this paper I test the implications of full consumption insurance using band spectrum regression methods. I argue that moving to the frequency domain provides a possible solution to many difficulties tied to tests of perfect risk sharing. In particular, it provides a unifying framework to test consumption smoothing, both over time and across states of nature. Full consumption insurance is soundly rejected at business cycle frequencies.
|Date of creation:||2008|
|Contact details of provider:|| Postal: CV4 7AL COVENTRY|
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page: http://www2.warwick.ac.uk/fac/soc/economics/
More information through EDIRC
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.:
- Angus Deaton & Christina Paxson, 1993.
"Intertemporal Choice and Inequality,"
NBER Working Papers
4328, National Bureau of Economic Research, Inc.
- Orazio P. Attanasio & Guglielmo Weber, 1994.
"Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey,"
NBER Working Papers
4795, National Bureau of Economic Research, Inc.
- Attanasio, Orazio P & Weber, Guglielmo, 1995. "Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1121-1157, December.
- Townsend, R.M., 1991.
"Risk and Insurance in Village India,"
University of Chicago - Economics Research Center
91-3, Chicago - Economics Research Center.
- Robert M. Townsend, "undated". "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
- Fatih Guvenen, 2007.
"Do Stockholders Share Risk More Effectively than Nonstockholders?,"
The Review of Economics and Statistics,
MIT Press, vol. 89(2), pages 275-288, May.
- Fatih Guvenen, 2005. "Do Stockholders Share Risk More Effectively Than Non- stockholders?," Macroeconomics 0508006, EconWPA.
- R. F. Engle & R. Gardner, 1973.
"Some Finite Sample Properties of Spectral Estimators of a Linear Regression,"
122, Massachusetts Institute of Technology (MIT), Department of Economics.
- Engle, Robert F & Gardner, Roy, 1976. "Some Finite Sample Properties of Spectral Estimators of a Linear Regression," Econometrica, Econometric Society, vol. 44(1), pages 149-165, January.
- Lawrence J. Christiano & Robert J. Vigfusson, 2001.
"Maximum likelihood in the frequency domain: the importance of time-to-plan,"
0106, Federal Reserve Bank of Cleveland.
- Christiano, Lawrence J. & Vigfusson, Robert J., 2003. "Maximum likelihood in the frequency domain: the importance of time-to-plan," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 789-815, May.
- Altug, Sumru & Miller, Robert A, 1990.
"Household Choices in Equilibrium,"
Econometric Society, vol. 58(3), pages 543-570, May.
- Sumru Altug & Robert A. Miller, 1987. "Household choices in equilibrium," Working Papers 341, Federal Reserve Bank of Minneapolis.
- Sumru Altug & Robert Miller, "undated". "Household Choices in Equilibrium," University of Chicago - Population Research Center 87-8, Chicago - Population Research Center.
- Hayashi, Fumio & Altonji, Joseph & Kotlikoff, Laurence, 1996. "Risk-Sharing between and within Families," Econometrica, Econometric Society, vol. 64(2), pages 261-294, March.
When requesting a correction, please mention this item's handle: RePEc:wrk:warwec:874. 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: (Margaret Nash)
If references are entirely missing, you can add them using this form.