Did you mean: "excess sensitivity" OR "rule of thumb" consumption income euler equation estimated regression empirical

[PDF][PDF] Consumption and liquidity constraints: an empirical investigation

SP Zeldes - The Journal of Political Economy, 1989 - JSTOR
... For many specifications of preferences, this individual will be constrained to consume less than
his ... 12 Hall and Mishkin's first test for excess sensitivity does not use a Keynesian alterna- tive ...
some previous authors, I allow the family utility function (and thus consumption) to be ...

[PDF][PDF] Consumption, income and interest rates: Reinterpreting the time series evidence

JY Campbell, NG Mankiw - NBER Macroeconomics Annual 1989, Volume …, 1989 - nber.org
... can no longer be precisely interpreted as the fraction of agents who consume their current ... We
begin our examination of consumption and real interest rates by maintaining the hypothesis that ...
will then go on to consider a more general model with some rule-of- thumb consumers. ...

Death to the log-linearized consumption Euler equation!(And very poor health to the second-order approximation)

CD Carroll - Advances in Macroeconomics, 2001 - degruyter.com
... Furthermore, 'excess sensitivity' tests can find either high or low degrees of sensitivity, depending
on the exact ... In the last period of life, the optimal plan is to consume everything, c ... an individual
household as ∆ log Ci,t+1 then the group-mean value of consumption growth across ...

Permanent income, current income, and consumption

JY Campbell, NG Mankiw - Journal of Business & Economic …, 1990 - amstat.tandfonline.com
... It dis- plays Flavin's (1981) "excess sensitivity" of consump- tion to income, since consumption
moves more ... no longer be precisely interpreted as the fraction of agents who consume their current ...
income per capita in 1982 dollars, and C, is per capita consumption of nondurables ...

[PDF][PDF] Excess sensitivity and asymmetries in consumption: an empirical investigation

R Garcia, A Lusardi, S Ng - Journal of Money, Credit, and Banking, 1997 - JSTOR
... in behavior between the liquidity-constrained, the myopic or the so-called rule-of-thumb con-
sumers ... that bu is numerically zero in the unrestricted regressions for both measures of
consumption. ... found no signifi- cant difference, both in terms of tests for excess sensitivity and ...

Household production and the excess sensitivity of consumption to current income

M Baxter, UJ Jermann - 1999 - nber.org
... their current income. In addition to the rule-of-thumb consumption function, several possible ex- ...
lustrates how apparent excess sensitivity arises in the presence of a nonmarket consumption
good. ... The share of market goods in the consumption aggregate is s = 0.63. The ...

Using subjective income expectations to test for excess sensitivity of consumption to predicted income growth

T Jappelli, L Pistaferri - European Economic Review, 2000 - Elsevier
... separabilities in the utility function is interesting in its own right and ensures that excess sensitivity
does not ... the effect of unevenly distributed aggregate shocks μ t+1 on the forecast error in
consumption. ... growth E it Δ ln Y it+1 with the subjective expectation of income growth g e i ...

Permanent income, current income, and consumption: Evidence from two panel data sets

A Lusardi - Journal of Business & Economic Statistics, 1996 - amstat.tandfonline.com
... permanent- income model and on the existence and quantitative impor- tance of "rule of thumb"
consumers ... Moreover, he did not find evidence in favor of excess sensitivity. ... complete, individuals7
marginal rate of substitution of consumption now for future consumption is equated ...

Testing for liquidity constraints in Euler equations with complementary data sources

T Jappelli, JS Pischke, NS Souleles - Review of Economics and statistics, 1998 - MIT Press
... 1994) splits the sample according to the constraint indicator and tests for excess sensitivity in
Euler ... Income and wealth measures in the PSID are deflated by the price index of personal
consumption expenditures (base year 1982–1984); food expenditures are deflated by the ...

Consumption over the Life Cycle and over the Business Cycle

OP Attanasio, M Browning - 1993 - nber.org
... In particular, we explain how ignoring demographics can lead to apparent excess sensitivity in
the ... samples, if some of them are very noisy and uncorrected with expected income. ... of demographic»
and labour supply variables on the Euler equation for consumption Real interest ...

[CITATION][C] The consumption function: A theoretical and empirical overview

J Muellbauer, R Lattimore - Handbook of …, 1995 - Blackwell Oxford, UK and …

How do house prices affect consumption? Evidence from micro data

JY Campbell, JF Cocco - Journal of Monetary Economics, 2007 - Elsevier
... to control for the endogeneity of cohort membership, one should estimate a selection equation
jointly with the consumption Euler equation on the ... some insights about the evolution of the
variables over the life-cycle we first regress log consumption and log income on 91 year ...

[PDF][PDF] Long-run labor supply and the elasticity of intertemporal substitution for consumption

S Basu, M Kimball - manuscript, University of Michigan, 2002 - files.nyu.edu
... this area. • equals labor income divide by nominal consumption expenditure. For the data, =0.77. ...
This contrast with Campbell and Mankiw's (1989) rule-of- thumb hypothesis and shows that excess
sensitivity does not exist. • Statistically, we can not reject the restriction of ...

Consumption adjustment under time-varying income uncertainty

JH Hahm, DG Steigerwald - Review of Economics and Statistics, 1999 - MIT Press
... To test for excess sensitivity of consumption under changing income uncertainty, we test the null ...
implies that 2 in equation (2.12) represents the share of consumers who consume current income. ...
or less, an increase in income uncertainty in period t leaves consumption in period ...

Is consumption growth consistent with intertemporal optimization? Evidence from the consumer expenditure survey

OP Attanasio, G Weber - 1994 - nber.org
... Finally, we can test theory restrictions in variousways, including the popular excess-sensitivity
tests. - ... Notes: MA (1).consistent stint dard errors in parenthes. Instruments used are second, third
and fourth lags of consumption growth, income growth, inflation and the real ...

Consumption, house prices, and collateral constraints: a structural econometric analysis

M Iacoviello - Journal of Housing Economics, 2004 - Elsevier
... However, describing rule-of-thumb consumers in the naive way C t = Y t may omit ... The coefficient
on income should then capture both the degree of excess sensitivity of consumption ... all the studies
that introduce housing wealth or housing prices in consumption equations do so ...

Consumption growth, the interest rate and aggregation

OP Attanasio, G Weber - The Review of Economic Studies, 1993 - restud.oxfordjournals.org
... and Mankiw (1989), who suggest the presence of liquidity- constrained households that consume
their labour ... cohort data than on aggregate data (on the basis of an excess sensitivity test to ... If the
cross-sectional distribution ofhousehold consumption was log-normal it would be ...

Consumption and credit: a model of time-varying liquidity constraints

S Ludvigson - Review of Economics and Statistics, 1999 - MIT Press
... excess sensitivity of consumption growth to forecastable income growth, it does not deliver a ...
Rule-of- thumb consumers are not directly influenced by credit availability because they are ...
calibration assumptions next and then describe the household's optimal consumption policy. ...

Approximation bias in linearized Euler equations

S Ludvigson, CH Paxson - Review of Economics and Statistics, 2001 - MIT Press
... Binding constraints will force these agents to consume their current income instead of their
permanent ... the value of indicated by the (average) slope of the true consumption growth equation ...
are less prudent (and less risk averse) than those with less-risky income streams, even if ...

The consumption response to income changes

T Jappelli, L Pistaferri - 2010 - nber.org
... Section 3 focuses on expected income changes, distinguishing between the traditional excess
sensitivity ... marginal propensity to consume with respect to income shocks, ie, the parameters ϕk .
These ... that is directly derived from the consumption Euler equations (3) and (11). ...

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Did you mean to search for: "excess sensitivity" OR "rule of thumb" consumption income euler equation estimated regression empirical


Grasshoppers, ants, and pre-retirement wealth: a test of permanent income

E Hurst - 2003 - nber.org
... also violate the PIH while young. Performing standard excess sensitivity tests, I am able to ... twenty
percent of the population appears to be rule of thumb and 2) both Engen et al. ... respectively,
household i's consumption, cash on hand for consumption, and household income ...

[PDF][PDF] The intertemporal elasticity of substitution: An exploration using a US panel of state data

P Beaudry, E Van Wincoop - Economica, 1996 - JSTOR
... of consumption is done by 'rule-of-thumb' consumers who simply consume their present ...
Throughout the paper we will refer to (2) as the rule-of-thumb specification, even though ... Column
(2) shows the type of consumption measure: ND= (de- seasonalized) nondurables, ND-NS ...

Superior information, income shocks, and the permanent income hypothesis

L Pistaferri - Review of Economics and Statistics, 2001 - MIT Press
... and Pistaferri (2000) to test for precau- tionary saving and excess sensitivity of consumption ... of
truly structural parameters (the marginal propensities to save or consume out of ... difference between
family dis- posable income (including asset income) and nondurable consumption. ...

Intertemporal non-separability and “rule of thumbconsumption

CE Weber - Journal of Monetary Economics, 2002 - Elsevier
... there be two types of households, rule of thumb households, which simply consume 100% of ...
2 shows one of these functional forms, the resulting Euler equation for permanent income
households, the Euler equation after accounting for rule of thumb consumption, and (since ...

[PDF][PDF] Consumption in developing countries: tests for liquidity constraints and finite horizons

NU Haque, P Montiel - The Review of Economics and Statistics, 1989 - JSTOR
... On the other hand, excess sensitivity has been inter- preted as suggesting the importance of ... with
the weight of the latter denoted 0. The constrained households consume their disposable ... to those
of other researchers due to differences in definitions of consumption and income ...

Tests for liquidity constraints: a critical survey

F Hayashi - 1985 - nber.org
... The failure of the orthogonality test is sufficient but not necessary, for the excess sensitivity
tes-t to fail, because mopft ... detrended quarterly US data on nondurables and disposable income
was so large that almost all of aggregate consumption was attributable to the "rule ...

[PDF][PDF] Consumption, down payments, and liquidity constraints

GV Engelhardt - Journal of Money, Credit and Banking, 1996 - JSTOR
... Jappelli and Pagano (1989) use international com- parisons to show that the excess sensitivity
of consumption to income is greater in ... TABLE 3 ESTIMATION RESULTS Dependent Valiable:
2-year Consumption Growth Rate (1) (2) (3) (4) (5) (6) ... Instrument for Income Growth? ...

Consumer demand and the life-cycle allocation of household expenditures

R Blundell, M Browning… - The Review of …, 1994 - restud.oxfordjournals.org
... We find that controlling for these characteristics is sufficientto eliminate excess sensitivity of
consump- tion growth to predictable income growth. ... 1971 5. The consumption path in Figure 2
is for all cohorts averaged. ... Income elasticities 0·725 0·896 1·391 0·643 0·651 2·131 ...

[PDF][PDF] Who is credit constrained in the US economy?

T Jappelli - The Quarterly Journal of Economics, 1990 - JSTOR
... An increase in A reduces (2) by oX'j/oA = aA - (1 + r) - A < 0, where aA is the propensity to consume
out of nonhuman wealth and A is the wealth ... It is worth noting that the SCF does not contain
quantitative information on saving or consumption. ... Income 1.927 (1.92)* -0.0551*** ...

The permanent income hypothesis:: Evidence from the consumer expenditure survey

JP DeJuan, JJ Seater - Journal of Monetary Economics, 1999 - Elsevier
... (7), whereas consumers in the second group simply consume their current ... If PILCH is rejected
because of rule-of-thumb consumption behavior, consumption should be equally responsive
to ... It seems possible that errors in recalling consumption, income, and tax payments are ...

[PDF][PDF] Habits, rationality and myopia in the life cycle consumption function

J Muellbauer - Annales d'Economie et de Statistique, 1988 - JSTOR
... con sumption hypothesis reconciles cross-section evidence for a low marginal propensity to
consume with that ... This "excess sensitivity to income", she argues, is the result of a fraction of
households facing liquidity ... This is a regression of consumption on a long distributed lag of ...

[PDF][PDF] Consumption, income, and retirement

AL Robb, JB Burbidge - Canadian Journal of Economics, 1989 - JSTOR
... a life-cycle model in which the household decides how much to consume each year ... the question
as to how much of this pattem is attributable to the 'excess sensitivity' of consumption ... with the
endogeneity of HNWR, we turn to our regression results for consumption and income. ...

Rule-of-ThumbConsumption, Intertemporal Substitution, and Risk Aversion

CE Weber - Journal of Business & Economic Statistics, 2000 - Taylor & Francis
... a lifetime utility function, whereas rule-of- thumb households simply consume 180% of ... assess
the robustness of previous findings that forecastable growth in disposable income helps explain ...
In short, there appears to be no rule-of-thumb consumption behavior in the postwar US ...

Consumption, habit formation, and precautionary saving: evidence from the British Household Panel Survey

A Guariglia, M Rossi - Oxford Economic Papers, 2002 - Oxford Univ Press
... his/her felicity by choosing the optimal level of resources to consume in each ... Finally, in the
generalised model consumption changes do not exhibit 'excess sensitivity' to income changes. ...
size also has a positive and statistically significant effect on consumption changes.25 In ...

What drives personal consumption? The role of housing and financial wealth

J Slacalek - The BE Journal of Macroeconomics, 2009 - degruyter.com
... walk model of Hall (1978) and the Campbell and Mankiw (1989) model with the rule-of-thumb
consumers, which can account for the excess sensitivity to predicted ... which would in presence
of non-separabilities between housing and non-housing consumption bias the ...

[PDF][PDF] " 3rd of tha Month": Do Social Security Recipients Smooth Consumption Between Checks?

M Stephens - American Economic Review, 2003 - JSTOR
... the pri- mary test of the LCPIH is expenditures on food and alcohol consumed away from ... on the
error term.12 The third issue is that standard tests of excess sensitivity cannot be ... are based upon
the Euler equation formulation un- der which changes in consumption should not ...

Life-cycle models of consumption: Is the evidence consistent with the theory?

A Deaton - 1986 - nber.org
... 15- "excess sensitivity" finding, which ... ut (13) sh ^ eh , .л Л = £t + £t (14) л h sh , sh ,1СЛ Act =
ut + et (15) If, as seems reasonable, it is assumed that each sub-component of averages to zero
over the population, then aggregate average consumption Дс and income Ду are ...

The permanent income hypothesis and consumption durability: analysis based on Japanese panel data

F Hayashi - 1984 - nber.org
... Since then quite a few papers have studied the issue of the excess sensitivity of -. ... 3. THEORY
As is made clear in the previous section, the standard permanent income ... C by M (3.3) k C tk
(j1,2,...,n). k=O That is, current consumption is a distributed lag function of current and past ...

Trends, random walks, and tests of the permanent income hypothesis

NG Mankiw, MD Shapiro - Journal of Monetary Economics, 1985 - Elsevier
... Flavin Marjorie, 1984; A. Flavin Marjorie; Excess sensitivity of consumption to current income:
Liquidity constraints or myopia? ... Optimal consumption with stochastic income: Deviations from
certainty equivalence. ... Consumption and liquidity constraints: An empirical investigation. ...

Habit persistence, nonseparability between consumption and leisure, or rule-of-thumb consumers: Which accounts for the predictability of consumption growth?

MT Kiley - The Review of Economics and Statistics, 2010 - MIT Press
... Rule-of-thumb consumers consume all of their current period income. ... in the current quarter) equals
the annualized growth rate in the personal consumption deflator between ... FIGURE 2.—90%
CONFIDENCE SETS FOR HABIT (H) AND RULE-OF-THUMB () PARAMETERS IN ...

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Inattentive consumers

R Reis - Journal of monetary Economics, 2006 - Elsevier
... model in this paper has further predictions beyond people's inattentiveness, excess sensitivity,
and excess ... The model is also contrasted with models of rule-of-thumb behavior, habit formation,
and ... 4 On the other hand, optimality with respect to consumption at two successive ...

Determinants of consumption and savings behavior in developing countries

LK Raut, A Virmani - The World Bank Economic Review, 1989 - World Bank
... is that the average propensity to consume out of current income is higher than the marginal
propensity to consume in the ... However, if the null hypothesis is to test both the unit root for log
consumption and no excess sensitivity to current or ... A Theory of the Consumption Function. ...

An empirical study of the 'rule of thumb'consumption model in five East Asian countries

YL Chyi, CH Huang - Applied Economics, 1997 - Taylor & Francis
... ie, Y,,, = (1 - A)%. Since the consumers of the first group consume their current ... with time-varying
interest rates, Campbell and Man- Expected change in log income kiw (1991 ... In the above
subsection, an alternative to the simple 'rule of thumb' consumption model of Equation (13 ...

Precautionary savings under income uncertainty: A cross-sectional analysis

V Dardanoni - Applied Economics, 1991 - Taylor & Francis
... by life-cycle behaviour, while there are several phenomena (like the apparent excess sensitivity
of consumption ... this must hold for all values of W, the mar- ginal propensity to consume out of ... in
the intercept and in the coefficient of the variance variable of the consumption function ...

[PDF][PDF] Real money balances and the timing of consumption: an empirical investigation

EF Koenig - The Quarterly Journal of Economics, 1990 - JSTOR
... In Section IV the Euler equations for interest-bearing assets and money are estimated jointly ...
whether or not, apart from the influence of the real rate of interest, consumption follows a ... As in
previous studies, both lagged changes in disposable income and lagged changes in stock ...

Consumption and Habits: Evidence from Panel Data*

R Carrasco, JM Labeaga… - The Economic …, 2005 - Wiley Online Library
... to permanent income shocks, and this can in principle explain the excess sensitivity of nondurable ...
The goods we explicitly model are food consumed at home, transport and services. ... fertility, and
professional career of the wife, among others) and their consumption does not ...

Testing the Response of Consumption to Income Changes with (Noisy) PanelData

JG Altonji, A Siow - 1986 - nber.org
... the conventional Euler equation for consumption andis analytically more ... hypothesis
of the Keynesian model, 2 is the elasticity of food consumption expenditures with
respect to income, a. The power of the test depends on the ...

Credit channels and consumption in Europe: empirical evidence

G De Bondt - 1999 - papers.ssrn.com
... of rule of thumb consumers and (1–λ) denotes the fraction of PI consumers ... the excess sensitivity
of consumption to current income derives from the failure of other assumptions ... the underlying
consumption model applies to variables measured at points in time, whereas available ...

[PDF][PDF] Consumption, income, and international capital market integration

T Bayoumi, R MacDonald - Staff Papers-International Monetary Fund, 1995 - JSTOR
... external consumption growth even when taking into account the impact of excess sensitivity of
consumption ... it generally will be), the coefficients on domestic income and foreign consumption
will be ... In addition, equation (5') implies that, in the face of rule of thumb consumers, the ...

Household consumption and monetary policy in China

Y Zhang, GH Wan - China Economic Review, 2002 - Elsevier
... One group allocate their resources intertemporally while the other simply consume their current ...
layoffs weakened consumer confidence in their job security and future income stability ... study are
annual values while households are likely to make their consumption–savings choice ...

Consumption excess sensitivity, liquidity constraints and the collateral role of housing

A Benito, H Mumtaz - 2006 - papers.ssrn.com
... There are other models which might generate excess sensitivity. ... In contrast, 'rule of thumb'
behaviour would seem to suggest a similar response to anticipated rises and falls in income. ... then
these will be more likely to influence the consumption-smoothing ability of such younger ...

[PDF][PDF] Golden eggs and hyperbolic discounting

D Laibson - The Quarterly Journal of Economics, 1997 - JSTOR
... consumed no earlier than next period.' By contrast, agents can always immediately consume
their x holdings ... asset stock do not depend on P. Self t is not able to consume the illiquid asset
immediately, so self t does not consider trade- offs between consumption today and ...

The consumption response to predictable changes in discretionary income: Evidence from the repayment of vehicle loans

M Stephens Jr - The Review of Economics and Statistics, 2008 - MIT Press
... The coefficients on the main regressor of interest, ΔPt+1, show evidence of excess sensitivity
to the ... whose loan payments comprise a large fraction of their after-tax income also have ... Notes:
The dependent variable is the change in nondurable consumption between quarters. ...

[HTML][HTML] The effect of income taxation on consumption and labor supply

JP Ziliak, TJ Kniesner - Journal of Labor Economics, 2005 - JSTOR
... To explain the apparent excess sensitivity puzzle, some researchers have turned to alternative
models ... for our purposes is that they stopped calculating household income tax liability ... the
parameters and because the regressors are endogenous (hours, consumption, and wages ...

[PDF][PDF] Consumption and capital market imperfections: An international comparison

T Jappelli, M Pagano - The American Economic Review, 1989 - JSTOR
... However, in principle there are other reasons that could account for excess sensitivity: nonrational
expectations about future income, mis- specified preferences, improper aggregation over agents
or over time ... To check if the degree of excess sensitivity of consumption can be ...

[PDF][PDF] Does buffer-stock saving explain the smoothness and excess sensitivity of consumption?

SC Ludvigson, A Michaelides - American Economic Review, 2001 - JSTOR
... documented elsewhere. See Deaton (1991, 1992); Carroll (1997a). 18 Many
of the early tests for excess sensitivity consisted of regressing the change in
consumption on the lagged level of income. As Mankiw ...

International wealth effects

J Slacalek - 2006 - econstor.eu
... 1989) propose a model with a fraction of income going to the “rule of thumb” consumers who ... error
in observed consumption data and wipes out most of the excess sensitivity in the ... 2Equation (3)
uses the following notation: Ct is consumption, At is net household wealth (net worth ...

Saving and income smoothing: Evidence from panel data

R Alessie, A Lusardi - European Economic Review, 1997 - Elsevier
... Contrary to the evidence from US macro data, we do not find that the 'excess sensitivity' of
consumption to ... The excess smoothness of consumption: Identification and interpretation. ... Stochastic
implications of the life cycle-permanent income hypothesis: Theory and evidence. ...

Consumption vs. expenditure

M Aguiar, E Hurst - 2004 - nber.org
... So, even though their total calories may not change, the quality of those calories
consumed should fall for households who are forced to decrease their consumption
at the time of retirement. ... Actually, retired households consume higher ...

Intertemporal substitution, imports and the permanent income model

RA Amano, TS Wirjanto - Journal of International Economics, 1996 - Elsevier
... Excess sensitivity of consumption to current income: Liquidity constraints or myopia?
Canadian Journal of Economics, 28 (1985), pp. 117–136. ... The permanent income hypothesis
and consumption durability: Analysis based on Japanese panel data. ...

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[PDF][PDF] The role of consumption in economic fluctuations

RE Hall - The American business cycle: Continuity and change, 1986 - nber.org
... Flavin (1981) have rejected the optimal response of consumption in favor of excess sensitivity
to current ... 2. Estimate the "propensity to consume," ~, in order to compute the residuals, Et , in
the ... Then I detrended real GNP, real consumption, and real military pur- chases with this ...

[PDF][PDF] Social security benefits, consumption expenditure, and the life cycle hypothesis

DW Wilcox - The Journal of Political Economy, 1989 - JSTOR
... issues, including Ricardian equivalence, government policy irrelevance, and the excess sensitivity
of consumption ... Such consumers are sometimes referred to as "rule-of-thumb" consumers since
they might tend ... data and then turning to the seasonally adjusted consumption data ...

Consumption and portfolio choice over the life cycle

JF Cocco, FJ Gomes… - Review of financial …, 2005 - Soc Financial Studies
... earned in period t. Then the investor must decide how much to consume, C it ... In the last period
the policy functions are trivial (the agent consumes all available wealth) and ... in Table 5. Apart
from these realistic parameterizations, we also solve the consumption–portfolio problem ...

International evidence on sticky consumption growth

CD Carroll, J Slacalek, M Sommer - Review of Economics and Statistics, 2011 - MIT Press
... specification for consumption growth adopted in the excess sensitivity literature,10 which has
been ... stands up against the alternative of habit formation or sticky expectations, rule-of-thumb
spend- ing ... First, the overwhelm- ing significance of consumption (and also income) in the ...

[PDF][PDF] Individual income, incomplete information, and aggregate consumption

JS Pischke - Econometrica: Journal of the Econometric Society, 1995 - JSTOR
... have stressed nonlinearities as a possible reason for excess sensitivity at the aggregate level. ...
that interest accrued on the portions of the shocks that had not been consumed in the ... As in the
model of the previous section, individual consumption changes still follow a martingale ...

Habits, Sentiment and Predictable Income in the Dynamics of Aggregate Consumption

M Sommer - 2001 - econstor.eu
... Keywords: consumer sentiment, excess sensitivity, habit formation, consumption, marginal
propensity to consume, tax cuts ... motive.12 Since the consumption of these consumers would
react immediately ... income accrues to the rule-of-thumb consumers. ...

Consumption

RE Hall - 1987 - nber.org
... framework. Nelson also confirmed that Flavin's strong results on excess sensitivity may be the
result of her procedure for detrendirig the data. ... other categories of consumption. Hayashi fouxi
that lagged Income has significant predictive power for the change in consumption, in ...

Why does consumer sentiment predict household spending?

YP Mehra, EW Martin - FRB Richmond Economic Quarterly, 2003 - papers.ssrn.com
... previous research is consistent with the presence of a different marginal propensity to consume
out of ... consumption follows a random walk once we account for the sensitivity of consumption
to current income, arising as a result of the presence of rule-of-thumb or liquidity ...

Public goods, merit goods, and the relation between private and government consumption

R Fiorito, T Kollintzas - European Economic Review, 2004 - Elsevier
... This model belongs to the class of permanent income models of consumption ... The underlying
idea is simply to derive an estimable equation that characterizes the relation between private ...
important features of the underlying goods, such as non-rivalness in consumption and time ...

[PDF][PDF] The time series consumption function revisited

AS Blinder, A Deaton, RE Hall, RG Hubbard - Brookings Papers on …, 1985 - JSTOR
... propensity to consume out of transitory income, which was variously explained by a "short ... and
wealth are zero.17 This test is precisely the "excess sensitivity" test carried ... Press, forthcoming),
explores the possibility of estimating (a very parsimonious) consumption function with ...

[PDF][PDF] Measuring deviations from the permanent income hypothesis

C Kim - International Economic Review, 1996 - JSTOR
... constrained hypothesis and a mixture of the PIH and the rule-of-thumb consumption hypothesis. ...
consumption is too sensitive to current income, although the excess sensitivity alone may ... Hence,
the deviation-consumption ratio approach applies identically except to regress onto ...

Incomplete intertemporal consumption smoothing and incomplete risk sharing

P Asdrubali, S Kim - Journal of Money, Credit and Banking, 2008 - Wiley Online Library
... intertemporal consumption smoothing, equation (2) allows for both excess sensitivity of
consumption ... smoothness (Campbell and Deaton 1989), as well as “rule of thumb” behavior
(Campbell ... EU data, we took Gross Domestic Product, Domestic Consumption, Country Population ...

Do liquidity constraints generate excess sensitivity in consumption? New evidence from a sample of post-bankruptcy households

L Filer, JD Fisher - Journal of Macroeconomics, 2007 - Elsevier
... Specifically, a myopic or rule-of-thumb consumer has a constant marginal propensity to consume,
which violates ... the results using only the bankruptcy filers, as long as the consumption behavior
of ... suggest that the bankruptcy flag is not the source of the excess sensitivity in the ...

Private consumption behaviour, liquidity constraints and financial deregulation in France: a nonlinear analysis

E Girardin, L Sarno, MP Taylor - Empirical Economics, 2000 - Springer
... may be guided by ``rules of thumb'' according to which they consume their current ... and France,
therefore sug- gesting that ®nancial deregulation has not reduced excess sensitivity of con ... of
the estimated model against the alternative of an error correction model for consumption. ...

[PDF][PDF] Intertemporal nonseparability or borrowing restrictions? A disaggregate analysis using a US consumption panel

C Meghir, G Weber - Econometrica: Journal of the Econometric Society, 1996 - JSTOR
... using the log-linear approximation which introduces a conditional variance term in the
consumption growth equation. ... variables, the labor market status of both spouses, the quantity
of food consumed out of the ... rate dated t and t - 1, quantities dated t - 1, and asset income dated ...

Uncertainty and consumer durables adjustment

G Bertola, L Guiso, L Pistaferri - The Review of …, 2005 - restud.oxfordjournals.org
... different taste-for-durable parameters had sharp implications for the average bundle consumed). ...
their behaviour in ways that offset the impact of labour income uncertainty on ... the observations
(roughly one third of the sample) that feature nondurable consumption information for ...

The joint consumption/asset demand decision: a case study in robust estimation

MA Flavin - 1991 - nber.org
... Further, the results do not provide any evidence that the excess sensitivity of consumption to ... the
effects of borrowing constraints, on the one hand, and "Keynesian" consumption behavior, on ...
7 - ß provides an estimate of the Keynesian marginal propensity to consume under the ...

Precautionary saving and consumption fluctuations

J Parker, B Preston - 2002 - nber.org
... puzzling features of US consumption data, such as excess sensitivity, excess smoothness, and
the equity premium puzzle.1 ... The economy consists of households that receive uncertain income ...
ment in average consumption, which we call misspecification and denote AlnCθ ...

The sensitivity of tests of the intertemporal allocation of consumption to near-rational alternatives

JH Cochrane - 1988 - nber.org
... The plan specifies how much to consume at each date t in each possible state s at that date.4 ...
Lucas calculated that the utility gain available from eliminating "cycles" in consumption was small
compared to ... "Excess Sensitivity" and "Excess Smoothness" Tests of the Permanent ...

[PDF][PDF] Expectations, heterogeneous forecast errors, and consumption: Micro evidence from the Michigan consumer sentiment surveys

NS Souleles - Journal of Money, Credit and Banking, 2004 - JSTOR
... found that for most sentiment questions, the effects of age and income varied the ... That is, given
current consumption, current sentiment should not help predict future consumption. ... requires that
both estimation steps be linear, so for the reported excess sensitivity tests Equation (1 ...

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The dynamics of consumers' expenditure: the UK consumption ECM redux

EF Corugedo, S Price, AP Blake - 2003 - papers.ssrn.com
... It is easy to specify models where a consumption ECM does exist: for example, with habit
persistence; rule-of-thumb satisficers; or liquidity constrained households. ... growth; a consumption
ECM will exist. But the point remains that ECMs for income or wealth should also exist. ...

Do borrowing constraints matter? An analysis of why the permanent income hypothesis does not apply in Japan

M Kohara, CY Horioka - Japan and the World Economy, 2006 - Elsevier
... We estimate expected income change using income change in the previous year and the
husband's educational attainment as instruments and include it in the explanatory variables for
consumption. ... In order to estimate the Euler equation, we kept an observation if it contained ...

[PDF][PDF] Ricardian Equivalence, Rational Expectations and the Permanent Income Hypothesis

AA Haug - Journal of Money, Credit and Banking, 1990 - JSTOR
... In the same way, the (xi coefficients measure excess sensitivity of consumption to government
spend- ing. ,3i and aLi should not be significantly different from zero if the permanent income
model is accepted. If government spending substitutes for private consump- ...

Private consumption, public consumption and liquidity constraints in developing countries: some empirical evidence

AEH Speight, MJ White - Applied Economics, 1995 - Taylor & Francis
... 1989,1990,1991) offer an alternative interpretation of such proportionality as owing to 'rule of
thumb' consumer behaviour. ... Campbell and Mankiw (1989,1990,1991) which accom- modates
a proportion of consumption growth being deter- mined by income growth due to ...

[PDF][PDF] Intertemporal substitution and durable goods: an empirical analysis

Y Fauvel, L Samson - Canadian Journal of Economics, 1991 - JSTOR
... He also found no evidence of excess sensitivity of consumption to income nor evidence of
significant ... i), which must be discounted by the factor 6, since they would be consumed in one ...
characteristic that, as long as / $ ', utility is not additively separable in the consumption of the ...

Consumer response to the Reagan tax cuts

NS Souleles - Journal of Public Economics, 2002 - Elsevier
... Souleles (1999), the natural alternative hypothesis is that households consume a fraction ... One
possible source of the estimated excess sensitivity is unobserved heterogeneity, such as
household ... discount rates or precautionary terms (the second moments of consumption in the ...

[PDF][PDF] Corporate savings and shareholder consumption

AJ Auerbach, K Hassett - National saving and economic performance, 1991 - nber.org
... income accrued to households facing liquidity constraints and having a marginal propensity to
consume current income ... We find that excess sensitivity has been episodic and confined to a
relatively small number of postwar ... 85 Corporate Savings and Shareholder Consumption ...

[PDF][PDF] Consumption inequality and partial insurance

R Blundell, L Pistaferri, I Preston - The American Economic Review, 2008 - JSTOR
... In other studies, consumption also exhibits excess sensitivity with respect to transitory shocks
(Robert Hall and Frederic Mishkin 1982).2 Modelsthat feature complete markets ... By focusing on
stable householdsand the interaction of consumption and income, however, we are ...

Heterogeneous life-cycle profiles, income risk and consumption inequality

GE Primiceri, T Van Rens - Journal of Monetary Economics, 2009 - Elsevier
... behavior of consumption under the PIH can be summarized by the following Euler equation for
log ... is aggregate inequality, the cross-sectional variance of log income or consumption for the ... The
peak becomes less pronounced if we trim the income distribution for outliers, see ...

Household intertemporal behaviour: A collective characterization and a test of commitment

M Mazzocco - The Review of Economic Studies, 2007 - restud.oxfordjournals.org
... not modelled, the difference in behaviour across households would be interpreted as excess
sensitivity to information ... the initial decision power μ i . In subsequent periods, the two agents
consume and save ... for each household in each quarter, I use only the consumption data for ...

Is there a retirement-consumption puzzle? Evidence using subjective retirement expectations

SJ Haider, M Stephens Jr - The review of economics and statistics, 2007 - MIT Press
... where Ct, Yt, and At are consumption, income, and assets in year t, respectively; U( ) is ... low,
households will adjust their consumption in period t such that the Euler equation holds, that ... we
discuss below, they are the same regressors used in the consumption change equations. ...

Smoothing consumption under income seasonality: buffer stocks vs. credit markets

S Chaudhuri, C Paxson - 2002 - academiccommons.columbia.edu
... to the receipt of (predictable) income tax refunds, Parker (1999) estimates households' propensity
to consume out of ... average consumption changes than in periods in which constraints are not
binding, and consumption changes will display “excess sensitivity” to anticipated ...

[PDF][PDF] Estimating discount functions from lifecycle consumption choices

D Laibson, A Repetto, J Tobacman - manuscript, January, 2004 - Citeseer
... We estimate that the marginal propensity to consume is 23% of the ... sensitivity to estimate θ ] Hβ,
δI in the second stage ... but more robust than derivativeMbased methods, and here it is preferred
because of the nonconvexities in quasiM hyperbolic consumption functions discussed ...

Ricardian equivalence: an empirical application to the Portuguese economy

CF Marinheiro - Catholic University of Leuven, CES Discussion …, 2001 - papers.ssrn.com
... model, as a result of the presence of non-optimising rule-of-thumb consumers (Brunila ... As
mentioned above, the excess sensitivity of consumption to current income is one of the ... conclusion
was against Ricardian equivalence: the budget deficit stimulates consumption by about ...

Does job insecurity affect household consumption?

A Benito - Oxford Economic Papers, 2006 - Oxford Univ Press
... facts associated with consumption over the life-cycle, such as the apparent excess sensitivity
of consumption ... 9 The income terms are considered in levels rather than logs since transitory
income takes on ... Consumption is considered in logs since in levels its distribution is skewed ...

[PDF][PDF] Aggregate consumption behaviour and liquidity constraints: the Canadian evidence

TS Wirjanto - Canadian Journal of Economics, 1995 - JSTOR
... When they are unable to borrow at the prevailing interest rate, they follow 'rule of thumb' behaviour
as in Campbell and Mankiw ... Aggregate consumption behaviour 1143 ... 7r, and b2 = (1 - 7r)0, where
ir is a fraction of individuals who are liquidity constrained and consume all their ...

[PDF][PDF] Sticky expectations and consumption dynamics

CD Carroll, J Slacalek - Johns Hopkins University, 2006 - econ2.jhu.edu
... Under frictionless expectations, the usual derivations lead to the usual Euler equation u (ct) =
RβEt[u (ct+1)], ... 2.3 CRRA Utility One of the lessons of the consumption literature after Hall (1978)
is that his simplifying ... exact stochastic structure of the income and transition processes. ...

Estimating credit constraints among US households

C Grant - Oxford Economic Papers, 2007 - Oxford Univ Press
... Google Scholar. ↵: Garcia R,; Lusardi A,; Ng S. (1997) Excess sensitivity and asymmetries in
consumption: an empirical investigation. ... Google Scholar. ↵: Hall RE. (1978) Stochastic implications
of the life cycle-permanent income hypothesis: theory and evidence. ...

[HTML][HTML] Anticipated and unanticipated wage changes, wage risk, and intertemporal labor supply

L Pistaferri - Journal of Labor Economics, 2003 - JSTOR
... The data have also been used to address more structural questions, such as estimating the excess
sensitivity of consumption to predicted ... education, regional dummies, number of children in three
age bands (0–5, 6–13, 14–17), the number of additional income recipients, a ...

Government debt and excess sensitivity of private consumption: estimates from OECD countries

L Pozzi, F Heylen, M Dossche - Economic Inquiry, 2004 - Wiley Online Library
... In that case, our results would be biased against the hypothesis that financial deregulation matters
for private consumption and its responsiveness to current income. ... given the highly significant
and positive b1 in Table 2, we observe typically higher excess sensitivity in the ...

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[PDF][PDF] Do consumers react to anticipated income changes? Evidence from the Alaska permanent fund

CT Hsieh - American Economic Review, 2003 - JSTOR
... Nonetheless, the point estimate of the income elasticity of consumption is still economically and ...
The last three columns in Table 2 present estimates of the response of expenditures on durables
to the Permanent Fund payments using the three excess sensitivity tests. ...

Estimating discount functions with consumption choices over the lifecycle

D Laibson, A Repetto, J Tobacman - 2007 - nber.org
... dictable income changes.11 We estimate that the marginal propensity to consume is 23% of the ...
puzzling, since endogenous labor supply could be used instead of credit card borrowing to smooth
consumption during transitory ... excess sensitivity to estimate in the second stage. ...

Liquidity constraint, uncertainty and household consumption in China

Y Zhang, G Hua Wan* - Applied Economics, 2004 - Taylor & Francis
... An empirical study of the 'rule of thumb' consumption model in five East Asian countries. ... 1. Average
and marginal propensities to consume. ... In view of the gradual nature of China's transition and
the 'stylized fact' in consumption literature that changes in consumption are smooth ...

Smooth it Like the 'Joneses'? Estimating Peer‐Group Effects in Intertemporal Consumption Choice*

J Maurer, A Meier - The Economic Journal, 2008 - Wiley Online Library
... is based on data from the well-known Panel Study of Income Dynamics (PSID ... to exploit these
additional restrictions, we combine condition (7) with the augmented Euler equation (5 ... Some
intuition should be provided regarding the way consumption externalities operate in (8). In ...

[PDF][PDF] Can severe fiscal contractions be expansionary? Tales of two small European countries

F Giavazzi, M Pagano - NBER Macroeconomics Annual 1990, Volume 5, 1990 - nber.org
... Data sources: OECD National Income Accounts, except for T*, which was provided by the EC. ...
Taxes appear to correlate negatively with private consumption: in re- gressions (1) and (2 ... and
significant; and it is generally negative (though often impre- cisely estimated) also in ...

Precautionary saving: An explanation for excess sensitivity of consumption

M Normandin - Journal of Business & Economic Statistics, 1994 - Taylor & Francis
... This holds because the PIH-CE model predicts that consumption is a martingale ... the
data-generating pro- cess and the calibrated process (10) imply a labor income Y, that ... by analyzing
alternative specifications of Equation (1 O).] More precisely, the excess sensitivity induced by ...

[PDF][PDF] What accounts for the variation in retirement wealth among US households?

BD Bernheim, J Skinner, S Weinberg - American Economic Review, 2001 - JSTOR
... The data are instead consistent with "rule of thumb," "mental accounting," or hyperbolic discounting
theories of ... to vary with 6. All else equal, impatient households should consume more than ... available
to the household at time t. However, if household consumption is subject to ...

[PDF][PDF] Government debt and the excess sensitivity of private consumption to current income: an empirical analysis for OECD countries

L Pozzi, F Heylen, M Dossche - Economic Inquiry, 2002 - Citeseer
... In contrast to many other studies (see section 1), we find no significant negative effect on excess
sensitivity from (our ... case, our results would be biased against the hypothesis that financial
deregulation matters for private consumption and its responsiveness to current income. ...

Modelling consumption: permanent-income or rule-of-thumb behaviour?

D Hatzinikolaou - Economic Modelling, 1999 - Elsevier
... Using Greek annual aggregate data, 1960–1993, it obtains estimates of the excess sensitivity
parameter from all models and finds that the ... 8. Utility loss of rule-of-thumb behaviour. ... who chooses
C 2 t =Y t in each period instead of choosing the optimal level of consumption, C t ...

[PDF][PDF] Testing the permanent income hypothesis: the evidence from Canadian data

TS Wirjanto - Canadian Journal of Economics, 1991 - JSTOR
... could rationalize the absence of asset accumulation and justify the 'rule-of-thumb' strategy of ... with
short multiperiod horizons are liquidity constrained but , do not necessarily consume their cuffent ...
all other goods will be correlated with the expected changes in consumption of non ...

What accounts for the variation in retirement wealth among US households?

BD Bernheim, J Skinner, S Weinberg - 1997 - nber.org
... The data are, however, consistent with "rule of thumb" or "mental accounting" theories of wealth ...
of leisure as a complement to marketed goods and services may consume less and ... between
the exogenous factors leading to retirement (being 65) and changes in consumption. ...

Intertemporal choice and consumption mobility

T Jappelli, L Pistaferri - Journal of the European Economic …, 2006 - Wiley Online Library
... In the next section we derive from theory the implications for consumption mobility of popular
models of intertemporal choice (PIH, rule-of-thumb, and consump- tion insurance), nest the models ...
To explore the relation between the consumption and the income distributions, it ...

CONSUMPTION SPENDING AND THE PAPER‐BILL SPREAD: THEORY AND EVIDENCE

CE Weber - Economic Inquiry, 1998 - Wiley Online Library
... remains statistically signifi- cant, but falls to around 0.2, so that rule of thumb behavior is ...
Households cannot consume negative quanti- ties and cannot issue government debt, al- though
they ... sense that all of the household's choice variables other than consumption growth are ...

Liquidity constraints, precautionary saving and aggregate consumption: an international comparison

N Sarantis, C Stewart - Economic Modelling, 2003 - Elsevier
... that only unconstrained consumers followed the REPIH/RELCH, while constrained consumers
consumed all their ... Assuming that constrained agents consume all their income, which implies
ΔlnTC t C =ΔlnY t ... (8), and the growth of constrained consumer consumption into the ...

An empirical investigation of the effect of borrowing constraints on Spanish consumption

AC Tarín - Spanish Economic Review, 2003 - Springer
... control for its presence. Another possible explanation behind the finding of excess
sensitivity may be habit formation, which gives a rationale to the co-movement
between consumption and income. In fact, this criticism ...

Borrowing constraints, income expectations and the Euler equation: Theory and evidence

AA Antzoulatos - Economics Letters, 1994 - Elsevier
... will depend not only on contemporaneous expected income, as the model with 'rule-of-thumb'
consumers predicts, but ... The effect on optimal consumption of increased uncertainty in labor income
in the multiperiod ... Consumption and liquidity constraints: An empirical investigation. ...

Excess sensitivity, liquidity constraints, and the collateral role of housing

A Benito, H Mumtaz - Macroeconomic Dynamics, 2009 - Cambridge Univ Press
... There are other models that might generate excess sensitivity. ... In contrast, “rule of thumb” behavior,
would seem to suggest a similar response to anticipated ... This involves estimation of the standard
consumption Euler equation, distinguishing between two groups of households. ...

Habit persistence and keeping up with the Joneses: evidence from micro data

E Ravina - 2005 - papers.ssrn.com
... The main categories it excludes are necessities (such as food consumed ... The household decides
how much to consume today versus tomorrow ... Ci,t by the ratio of the standard deviations of each
HH con- sumption growth rate and its reference group's consumption growth rate. ...

Paycheque Receipt and the Timing of Consumption*

M Stephens - The Economic Journal, 2006 - Wiley Online Library
... Overall, the evidence in this article shows that households exhibit excess sensitivity to the receipt
of their ... One category that should represent 'instant' consumption is food consumed away from
home. ... 2), Food for home (3), Food away (4), Fresh food (5), Instant consumption (6). ...

Imputing consumption in the PSID using food demand estimates from the CEX

R Blundell, L Pistaferri, I Preston - 2004 - discovery.ucl.ac.uk
... Both papers estimate Euler equations for consumption. Alessie and Lusardi use longi- 1 ... Blundell,
Pistaferri and Preston (2004) is a companion paper that uses the technique described in this
paper to study consumption inequality and partial insurance of income shocks. ...

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House prices, collateral constraint, and the asymmetric effect on consumption

NK Chen, SS Chen, YH Chou - Journal of housing economics, 2010 - Elsevier
... the rules-of-thumb (they consume their current income), and others consume according to LC ...
The paper, however, focuses on excess smoothness and excess sensitivity of consumption
behavior. ... the evidence regarding the impacts of real house prices on consumption is mixed. ...

[PDF][PDF] Explaining consumption: a simple test of alternative hypotheses

T Bayoumi - Staff Papers-International Monetary Fund, 1997 - JSTOR
... 3The "excess" sensitivity of consumption to income was originally highlighted by Flavin (1981). ...
The remaining proportion, kr, is assumed to be associated with "rule of thumb" consumers who ...
Figure 1. Percentage Change in Income and Consumption Across Canadian Regions ...

[PDF][PDF] Wealth accumulation, credit card borrowing, and consumption-income comovement

DI Laibson, A Repetto, J Tobacman - 2003 - webmeets.com
... See Deaton (1992) and Browning and Lusardi (1996) for discussion of the excess sensitivity
literature. ... Consequently, the model predicts a marginal propensity to consume out of predictable
changes in income of 0.26, according ... Similarly, the simulated value of the consumption ...

How forecastable is consumption growth? New evidence on the Hall random walk hypothesis

AD Viard - Applied Economics, 1997 - Taylor & Francis
... The empirical tests further suggest that excess sensitivity of consumption to current disposable
income, rather ... income may re¯ ect the presence of liquidity-constrained or rule-of-thumb con-
sumers, it ... of return on any asset, if its conditional covariance with consumption growth is ...

[PDF][PDF] Saving in developing countries: theory and review

A Deaton - 1989 - princeton.edu
... The results in the figures are consistent with the "excess sensitivity" findings in the US literature ...
nilly as a long- run consequence of their taste for future over present consumption. ... the division
of con- sumers into two groups—liquidity-constrained or "rule-of-thumb" consumers and ...

[PDF][PDF] Capital market" imperfections" and the consumption function

MA King - The Scandinavian Journal of Economics, 1986 - JSTOR
... some attention has been paid to "liquidity constraints" as a means of explaining the excess
sensitivity of consumption to current income. ... of first-period consumption is such that they choose
to consume at the kink in the budget constraint where C1 = w1. ...

Financial liberalization and aggregate consumption: the evidence from Taiwan

VL Chan, SC Hu - Applied Economics, 1997 - Taylor & Francis
... 1995), and that the utility gains from lifetime optimization over the rule of thumb is of ... The most
common explanation for `excess sensitivity' is that credit constraints prevent a segment ... fourth
columns provide the R` 2 statistics obtained by regressing consumption, and disposable ...

Instrument relevance in multivariate linear models: A simple measure

J Shea - Review of Economics and Statistics, 1997 - MIT Press
... Online publication date: 1-Sep-2000. Marianne Baxter, Urban J Jermann. (1999) Household
Production and the Excess Sensitivity of Consumption to Current Income. American
Economic Review 89902-920. Online publication date: 1-Sep-1999. ...

[PDF][PDF] Testing the Life Cycle Model of Consumption: What Can We Learn From Micro and Macro Data

O Attanasio, M Browning - Investigaciones Económicas, 1994 - funep.es
... time series data cannot be used to test the 9 On the excess sensitivity of consumption ... c) The short
run average propensity to consume (unlike its long run equivalent) seems to be a ... will discuss
methods to describe and characterize the life cycle profile of consumption (and other ...

The Debt‐Payment‐to‐Income Ratio as an Indicator of Borrowing Constraints: Evidence from Two Household Surveys

KW Johnson, G Li - Journal of Money, Credit and Banking, 2010 - Wiley Online Library
... how close it is to its credit limit, at which point the household can consume only its ... top quintile
is nearly 10 times more sensitive to lagged income than the consumption growth of ... This excess
sensitivity is robust to different thresholds for both the liquid-asset-to-income ratio and ...

Estimating intertemporal allocation parameters using synthetic residual estimation

S Alan, M Browning - The Review of Economic Studies, 2010 - restud.oxfordjournals.org
... validity of the standard orthogonality assumptions in general and for the “excess sensitivity” of
consumption ... on the level of accumulated assets and the marginal propensity to consume out
of ... in the real interest rate, and the persistent variances in observed consumption growth. ...

Income inequality, financial development, and macroeconomic fluctuations*

MF Iyigun, AL Owen - The Economic Journal, 2004 - Wiley Online Library
... this point, showing that individuals who are likely to be borrowing constrained have greater excess
sensitivity of consumption ... However, when per capita income is higher, this effect is reversed and
greater inequality is associated with higher aggregate consumption variability ...

Evidence on excess sensitivity of consumption to predictable income growth

M Limosani, E Millemaci - Research in Economics, 2011 - Elsevier
... In this section we explore: (i) whether there is evidence of excess sensitivity of consumption
to income and how it relates to the failure of capital markets; (ii) the role of myopia/irrationality
once excess sensitivity and liquidity constraints are taken into account. ...

Consumer confidence and consumption in Sweden

L Berg, R Bergstrom - Dept. of Econ., Uppsala University WP, 1996 - papers.ssrn.com
... models of the Euler equation type and traditional solved-out consumption function. ... 3.
Consumer confidence, income and other macroeconomic variables One explanation for
the correlation between consumption and the confidence indices might ...

Temporary and permanent changes in consumption growth

G Berloffa - The Economic Journal, 1997 - Wiley Online Library
... holds even in the broader specification of the model and given that the cohort analysis averages
both consumption growth and income growth over ... those included in the broader specification
of the model could be so important to eliminate the excess sensitivity result. ...

[BOOK][B] Alternative specifications for consumption and the estimation of the intertemporal elasticity of substitution

P Beaudry, E Van Wincoop - 1992 - research.mpls.frb.fed.us
... of consumption is done by “rule of thumb” consumers who simply consume their present ...
1,--y—_-=-7-.s-... that the introduction of rule of thumb oonsumers is a reasonable and ... Mariger,
RP, Consumption Behavior and the Effects of Fiscal Policies, Cambridge: Harvard University ...

Life-cycle consumption under social interactions

M Binder, MH Pesaran - Journal of Economic Dynamics and Control, 2001 - Elsevier
... puzzles associated with the permanent income hypothesis, namely excess smoothness and
excess sensitivity. ... consumer, the number and strength of impulses to consume more depends ...
analyze the implications of the individual-specific optimal consumption decisions implied ...

A model of the consumption response to fiscal stimulus payments

G Kaplan, GL Violante - Econometrica, 2014 - Wiley Online Library
... permanent income (the saver); the other, highly impatient and following the rule of thumb of
spending ... of two assets featuring different return and liquidity characteristics induces “excess
sensitivity” in consumption ... CONSUMPTION RESPONSE TO FISCAL STIMULUS PAYMENTS ...

LIQUIDITY CONSTRAINTS AND THE SUBSTITUTABILITY BETWEEN PRIVATE AND GOVERNMENT CONSUMPTION: THE ROLE OF MILITARY AND NON‐ …

P Evans, G Karras - Economic Inquiry, 1998 - Wiley Online Library
... constrained, and showed that liquidity constraints can result in consumption'sexcess sensitivity
to current ... their entire disposable income according to the following "rule-of-thumb" behavior ... The
im- plication is that military services complement private consumption, whereas non ...

Inequality over the business cycle: Estimating income risk using micro-data on consumption

GE Primiceri, T Van Rens - Available at SSRN 319800, 2004 - papers.ssrn.com
... The marginal propensity to consume out of a permanent shocks is ρt, out of a transitory ... that
marginal utilities of consumption move in lock-step and every indi- vidual consumes a fixed ... need
in order to be able to calculate the covariance between income and consumption.10 In ...

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[PDF][PDF] On the aggregation of Euler equations for consumption in simple overlapping-generations models

OP Attanasio, G Weber - Economica, 1995 - JSTOR
... The data so generated are used to run two regressions: one of aggregate consumption growth
on the real interest rate, and one of the same variable on both the interest ... This second regression
should help us evaluate the extent of excess sensitivity to labour income in this ...

Do homeowners increase consumption after the last mortgage payment? An alternative test of the permanent income hypothesis

B Coulibaly, G Li - Review of Economics and statistics, 2006 - MIT Press
... As in previous studies, he finds evidence of excess sensitivity in house- holds' consumption
(see also Stephens, 2003). ... The second group consists of farmers and agricultural workers,
because for these consumers it is difficult to separate income from consumption. ...

[PDF][PDF] Precautionary saving under liquidity constraints: a decomposition

X Xu - International Economic Review, 1995 - JSTOR
... variables that are observable at time t - 1. They then test excess sensitivity by the ... The authors
then propose an alternative hypothesis: there exist the rule-of-thumb consumers, who are ...
forward-looking nor optimizing but simply spending a fraction of their income for consumption. ...

[HTML][HTML] Consumption in South America: myopia or liquidity constraints?

FAR Gomes, LS Paz - Economia Aplicada, 2010 - SciELO Brasil
... Furthermore, Sarantis & Stewart (2003) had to assume that rule-of-thumb (myopic) consumers
spend all ... Garcia, R., Lusardi, A. & Serena, N. (1997), 'Excess sensitivity and asymmetries in ... Mankiw,
NG (1982), 'Hall' consumption hypotesis and durable goods', Journal of Monetary ...

Precautionary saving under liquidity constraints: Evidence from rural Pakistan

JJ Lee, Y Sawada - Journal of Development Economics, 2010 - Elsevier
... household's decision problem is presented here to derive the key equations for empirical ... assets
at the beginning of the period, exogenously given income, and the ... is introduced into the household
problem, and, accordingly, we derive the following consumption Euler equation: ...

Separability and Aggregate Shocks in the Life‐cycle Model of Consumption: Evidence from Spain

MD Collado - Oxford Bulletin of Economics and Statistics, 1998 - Wiley Online Library
... and therefore we cannot use this data set to test excess sensitivity of consumption ... we consider
demographic variables as exoge- nous,10 we only instrument consumption variables, the ... When
we estimated these equations including real income, the nominal interest rate, real ...

Saving and habit formation: evidence from Dutch panel data

R Alessie, F Teppa - Empirical Economics, 2010 - Springer
... contrasting some of the permanent income model's predictions, such as the “excess sensitivity
of aggregate ... that if γ = 0 (no habit formation), the marginal propensity to consume (MPC) out ...
equation (8) because the DHS data does not contain direct information on consumption. ...

Cross-country heterogeneity in intertemporal substitution

T Havranek, R Horvath, Z Irsova, M Rusnak - 2013 - papers.ssrn.com
... constrained households may be linked to income, as it is for the rule-of-thumb consumers of ... in
the estimation to test for the excess sensitivity of consumption to the current income, and ... Estimation
We have noted that the log-linearized consumption Euler equation is the most ...

Expected consumption growth from cross-country surveys: implications for assessing international capital markets

CM Engel, JH Rogers - FRB International Finance Discussion …, 2008 - papers.ssrn.com
... consumption to current income. We let R ... reasoning is that if indeed the consumption growth rates
of the expected utility maximizing households and the rule-of-thumb households are different,
then their weight μ in aggregate consumption might evolve over time. ...

Estimating panel models with internal and external habit formation

GM Korniotis - Journal of Business & Economic Statistics, 2010 - amstat.tandfonline.com
... of internal and external habits, I test for their significance by estimating Euler equations with data
for ... The Euler equation of the eco- nomic model with both types of habit formation ... determined by
economy- wide shocks that also influence state-level consumption growth, which is ...

Does financial reform raise or reduce saving?

O Bandiera, G Caprio, P Honohan… - Review of Economics …, 2000 - MIT Press
... aged households that had hitherto been constrained from lifecycle borrowing to consume at a ...
value of nonhuman wealth will normally, ceteris paribus, reduce saving as consumption out of ...
equity withdrawn by UK households each year in the 1980s was consumed (rather than ...

Consumption and children

M Browning, M Ejrnæs - The Review of Economics and Statistics, 2009 - MIT Press
... response is that this is evidence that households use some rule of thumb for consumption ... inverted
U-shape for consumption (and, consequently, any evidence of excess sensitivity of consumption ...
moments, this will lead to significant (but spurious) “age” effects on consumption. ...

Consumption and wealth: An international comparison

JA Sefton - The Manchester School, 1999 - Wiley Online Library
... Similarly we also report the estimates of the propensity to consume P, the discount factor y, and
the parameters ... in these countries, and with the signi¢cant observed changes in the personal
sector debt-to-income ratios. ... Consumption and Wealth: An International Comparison ...

[PDF][PDF] House prices, borrowing constraints, and monetary policy in the business cycle

M Iacoviello - American economic review, 2005 - JSTOR
... Households consume, work, and demand real estate and money ... The first-order conditions for
an optimum are the consumption Euler equation, real estate demand, and labor demand ... Both
the Euler and the housing demand equations differ from the usual formulations be- cause ...

[PDF][PDF] Euler equations and durable goods

M Padula - Centre for Studies in Economics and Finance Working …, 1999 - csef.it
... The data are from a representative American survey, the Consume Expenditure Survey ... the durable
goods are substitute, the marginal utility of non-durable consumption increases when ...
macrodata(Bernanke [7]). Finally, all the specifications pass the excess sensitivity test: when ...

[PDF][PDF] Household Consumption and Household Type: What Can We Learn from Mortgage Refinancing?

E Hurst - University of Chicago Graduate School of …, 1999 - faculty.chicagobooth.edu
... 9 empirical findings with regard to the 'excess sensitivity' of consumption to predictable changes
in ... cycle model and outline the empirical tests for liquidity constraints, rule-of-thumb behavior ... To
test whether household consumption responds to predictable changes in income, the ...

[PDF][PDF] Expenditure on durable goods: a case for slow adjustment

RJ Caballero - The Quarterly Journal of Economics, 1990 - JSTOR
... periods, a consumer with i < dn periods of delay exhibits a consumption process equal ... in Lam
[1986], suggest that this only introduces a parameter of excess sensitivity in the ... nondurables and
services, and durables expenditures as reported by the National Income and Product ...

[PDF][PDF] Does financial deregulation cause a consumption boom?

J Agell, L Berg - The Scandinavian Journal of Economics, 1996 - JSTOR
... Under a standard alternative hypothesis, excess sensitivity rather reflects some kind of
rule-of-thumb behaviour. ... presumption as to how financial deregulation would affect the decision
rules of rule- of-thumb households. ? ... represent time averages of consumption and income. ...

A Retrospective on Friedman's Theory of Permanent Income*

C Meghir - The Economic Journal, 2004 - Wiley Online Library
... Another important mechanism for this is the price index itself; if households with children consume
a different bundle of commodities than households without ... Table 1. Excess Sensitivity Tests in
the UK and the US using Micro Data (Dependent variable: Consumption growth). ...

Present value tests of the current account with durables consumption

TB İşcan - Journal of International Money and Finance, 2002 - Elsevier
... However, when nontraded as well as traded goods are produced and consumed, aggregate
output ... is stationary in levels despite the fact that consumption, interest income from abroad ...
intertemporal model by testing the stationarity of the current account, consumption and net ...

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Is the bankruptcy flag binding? Access to credit markets for post-bankruptcy households

J Fisher, L Filer, A Lyons - American Law & Economics …, 2004 - law.bepress.com
... A myopic or rule-of-thumb consumer has a constant marginal propensity to consume, which ... “Using
Subjective Income Expectations to Test for Excess Sensitivity of Consumption to Predicted Income
Growth,” European Economic Review 44 (2000). ... Consumption ($) ...

[PDF][PDF] Is consumption too smooth? Long memory and the Deaton paradox

FX Diebold, GD Rudebusch - The Review of Economics and Statistics, 1991 - JSTOR
... in Campbell and Deaton (1989), Campbell and Mankiw (1990), and West (1988), while excess
sensitivity is discussed ... IS CONSUMPTION TOO SMOOTH ... TABLE 2.-DISCOUNTED IMPULSE
RESPONSE FOR QUARTERLY DISPOSABLE INCOME, /3 = 1 ARFIMA(p, d, q) (AIC) d ...

The household balance sheet and durable consumer expenditures: an empirical investigation for The Netherlands, 1972–93

M De Ruiter, DJC Smant - Journal of Policy Modeling, 1999 - Elsevier
... changes in consumption, and consumption appears to exhibit excess sensitivity to unexpected ...
However, liquidity constraints and “rule-of-thumb” consumer spending are not the only ... 8, describing
the (long-run) equilibrium relationship between consumption, income, wealth, and ...

[PDF][PDF] Hyperbolic discounting and consumption

C Harris, D Laibson - … Proceedings of the 8th World Congress …, 2001 - pages.stern.nyu.edu
... that make our model qualitatively hyperbolic; our equilibrium concept; and the tech nical
assumptions that allow us to derive the Hyperbolic Euler Relation. We discuss ... Because income
is iid, the only state variable is cash on hand x|. ... Hyberbolic Discounting and Consumption 13 ...

[PDF][PDF] The response of expenditures to anticipated income changes: panel data estimates

M Browning, MD Collado - American Economic Review, 2001 - JSTOR
... discounted) expenditure constant." This is con- sistent with the fact that consumption itself is ...
graphical analysis we also conducted a conventional Euler equation test of "excess sensitivity."
We shall ... One notable feature of this analysis is that we can predict income changes (for ...

Durables, nondurables, down payments and consumption excesses

MJ Luengo-Prado - Journal of Monetary Economics, 2006 - Elsevier
... Finally, we explore whether a plausible parametrization of the model can account for the excess
sensitivity and excess smoothness observed in the aggregate ... At the individual level, we find that
nondurable consumption becomes smoother relative to income as down ...

Predictable Life-Cycle Shocks, Income Risk and Consumption Inequality

GE Primiceri, T Van Rens - Income Risk and Consumption …, 2006 - papers.ssrn.com
... 0 ), the marginal propensity to consume ... because of an increase in transitory income inequality,
because a fraction # of consumers displays excess sensitivity to income ... To see this, consider
the evolution of consumption inequality from (11), explicitly taking into account that each ...

The consumption response to predictable changes in discretionary income: evidence from the repayment of vehicle loans

M Stephens Jr - 2003 - nber.org
... of marginal propensities to consume, Souleles finds that each additional dollar of income ... sensitivity
to predictable income changes is explored to see if liquidity (borrowing) con- ... Therefore, the
estimate in Column 2 may understate the true consumption response. 14 Page 17. ...

[BOOK][B] Wealth, disposable income and consumption: some evidence for Canada

RT Macklem - 1994 - econ2.jhu.edu
... efficient estimates of the long-run propensities to consume out of wealth ... The finding that this
relative price has little explana- tory power for consumption suggests that the GDP deflator is
appropriate. ... The VAR can be used to forecast net income growth and the real interest ...

Testing liquidity constraints in 10 Asian developing countries: an error-correction model approach

MS Habibullah, P Smith, WNW Azman-Saini - Applied Economics, 2006 - Taylor & Francis
... View all references), we explore this idea by allowing the 'excess sensitivity parameter', λ, to vary ...
the significance of θ 1 (equivalent to λ) is the test for rule-of-thumb behaviour (myopia ... that including
income does not induce substantial simultaneity bias in the consumption model. ...

Sensitivity of consumption to income and to government purchases: some specification and estimation issues

D Hatzinikolaou - Applied Economics, 2000 - Taylor & Francis
... The modi®ed Euler equations have been used to estimate the `excess sensitivity parameter',
which ... that when the economy is growing and its consumers prefer to consume today rather ... of
2.00 for the full- sample period, which suggests that private consumption and government ...

[BOOK][B] Understanding Saving Behaviour in the UK: Evidence from the BHPS.

A Guariglia - 1998 - Citeseer
... 'The Adjustment of Consumption to Changing Expectations about Future Income.' Journal of
Political Economy, vol. 89, pp. 974-1009. Friedman, M. (1957). A Theory of the Consumption
Function. ... Garcia, R., Lusardi, A., and Ng, S., (1997). 'Excess Sensitivity and Asymmetries in ...

[BOOK][B] Financial liberalisation, consumption and debt in South Africa

J Aron, J Muellbauer - 2000 - nuff.ox.ac.uk
... Such issues are widely believed to be a major reason for the 'excess sensitivity' of consumption
changes to ... Cochrane (1989) has shown that the utility gains from optimal intertemporal
consumption choices are low compared with simple alternative rule of thumb behaviour. ...

[PDF][PDF] Excess smoothness of consumption in an estimated life cycle model

D Hryshko - 2011 - arts.ualberta.ca
... Michaelides (2001) use this process to analyze “excess smoothness” and “excess sensitivity
puzzles on ... of risk (idiosyncratic and aggregate) on the marginal propensity to consume in the ...
sensitivity of household consumption to income news can be described by the equation ...

[PDF][PDF] Adjustment of consumers' durables stocks: Evidence from automobile purchases

JC Eberly - Journal of Political Economy, 1994 - JSTOR
... other estimates. Campbell and Mankiw (1989), for example, estimate that
rule-of-thumb consumers, who equate consumption and income, represent
between 20 and 50 percent of the aggregate. Zeldes (1989 ...

[PDF][PDF] Empirical implications of limited commitment. Evidence from Mexican villages

P Albarran, O Attanasio - CEMFI and UCL manuscript, 2002 - ceu.hu
... such as, once again, the variance and persistence of income that would affect it under the ... transform
consumption at time t into consumption at time t+1 at a rate R, which is ... Given this resource
constraint, it will be possible to derive an Euler equation for each of the ...

Reconciling consumer confidence and permanent income consumption

KH McIntyre - Eastern Economic Journal, 2007 - JSTOR
... This "excess sensitivity" of consumption with regard to consumer confidence and/or that consumer
confidence ... require making an as sumption concerning the joint distribution of consumption and
asset ... Permanent income models are commonly estimated with an overidentifying ...

Consumption and precautionary saving: An empirical analysis under both financial and environmental risks

D Baiardi, M Manera, M Menegatti - Economic Modelling, 2013 - Elsevier
... Given such preferences and extending the univariate framework of Carroll, 1992 and Carroll,
1997, we consider a bivariate intertemporal consumption model: ... 1+r)(Wt+Yt−Ct) W t + 1 = 1 +
r W t + Y t − C t. where Y is income, W is ... (2) and (3) we get the Euler's equation: equation(5 ...

Understanding the effects of government spending on consumption

J Galí, JD López-Salido, J Vallés - 2004 - papers.ssrn.com
... own any assets or have any liabilities, and just consume their current labor income. ... the quantitative
importance of such rule#of#thumb consumers in the US and other ... In our framework, the existence
of a mechanism to smooth consumption over time is critical for the distinction ...

What can explain excess smoothness and sensitivity of state-level consumption?

MJ Luengo-Prado, BE Sørensen - The Review of Economics and …, 2008 - MIT Press
... I. Introduction WE estimate marginal propensities to consume (MPC) out of current and lagged
income for US states using panel data regressions that control for time-specific and state-level
fixed effects. ... Clearly, consumption displays excess sensitivity in our data. ...

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