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2 edition of Household production and the excess sensitivity of consumption to current income found in the catalog.

Household production and the excess sensitivity of consumption to current income

Marianne Baxter

Household production and the excess sensitivity of consumption to current income

by Marianne Baxter

  • 88 Want to read
  • 8 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English

    Subjects:
  • Households -- Economic aspects -- United States -- Econometric models.,
  • Consumption (Economics) -- United States -- Econometric models.,
  • Income -- United States -- Econometric models.,
  • Business cycles -- United States -- Econometric models.,
  • Consumer goods -- United States -- Econometric models.

  • Edition Notes

    StatementMarianne Baxter, Urban J. Jermann.
    SeriesNBER working paper series -- working paper 7046, Working paper series (National Bureau of Economic Research) -- working paper no. 7046.
    ContributionsJermann, Urban J.
    Classifications
    LC ClassificationsHB1 .W654 no. 7046
    The Physical Object
    Pagination57, [3] p. ;
    Number of Pages57
    ID Numbers
    Open LibraryOL22400307M

    Household Production and the Elasticity of Marginal Utility of Consumption 4 lowest). In addition, I compute point estimates in the range of –, but unfortunately these latter results should be considered more as an illustration of the proposed method than a final conclusion, since some of the underlyingFile Size: 1MB. Chart Pack Household Sector. Released on 5 February (data updated to 30 January) Household Income and Consumption. Download this single image. Consumer Sentiment. Download this single image. Private Dwelling Investment. Download this single image. Private Residential Building Approvals. Download this single image.

    Using Subjective Income Expectations to Test for Excess Sensitivity of Consumption to Predicted Income Growth Tullio Jappelli * and Luigi Pistaferri ** Abstract We test for precautionary saving and excess sensitivity of consumption to predicted income growth using a panel survey of Italian households that has measures of subjective. focuses on expected income changes, distinguishing between the traditional excess sensitivity tests, the effect of income increases and of income declines. Section 4 reviews three approaches to estimate the effect of unexpected income changes on consumption File Size: KB.

    payments do not depend on income, the two statistics are negatively correlated such that the welfare losses are similar across households and small (less than % of wealth), despite the large MPCs. JEL Codes: D12, E21, G Keywords: consumption excess sensitivity, MPC heterogeneity, welfare Size: KB. The permanent income hypothesis (PIH) is an economic theory attempting to describe how agents spread consumption over their lifetimes. First developed by Milton Friedman, it supposes that a person's consumption at a point in time is determined not just by their current income but also by their expected income in future years—their "permanent income". ". In its simplest .


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Household production and the excess sensitivity of consumption to current income by Marianne Baxter Download PDF EPUB FB2

Household Production and the Excess Sensitivity of Consumption to Current Income Marianne Baxter, Urban J. Jermann. NBER Working Paper No. Issued in March NBER Program(s):Economic Fluctuations and Growth Program. Household Production and the Excess Sensitivity of Consumption to Current Income By MARIANNE BAXTER AND URBAN J.

JERMANN* Empirical research on the permanent-income hypothesis (PIH) has found that consumption growth is excessively sensitive to predictable changes in income.

This finding is interpreted as strong evidence against the PIH. Household Production and the Excess Sensitivity of Consumption to Current Income by Marianne Baxter and Urban J. Jermann. Published in vol issue 4, pages of American Economic Review, SeptemberAbstract: Empirical research on the permanent-income hypothesis (PIH) has found that c.

Although the PIH is true, this mechanism generates apparent excess sensitivity because market consumption responds to predictable income growth. Advanced search Economic literature: papers, articles, software, chapters, books.

Although the PIH is true, this mechanism generates apparent excess sensitivity because market consumption responds to predictable income growth. Empirical research on the permanent income hypothesis (PIH) has found that consumption growth is excessively sensitive to predictable changes in income.

w Household Production and the Excess Sensitivity of Consumption to Current Income: Flavin: w The Excess Smoothness of Consumption: Identification and Interpretation: Hall and Mishkin: w The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households: Hayashi: w The Effect of Liquidity Constraints on Consumption:.

An alternative grouping (by total household income instead of head-total compensation) produces qualitatively similar estimates of excess sensitivity. The consumption/income ratio is defined as nondurable consumption expenditure of the previous three months divided by the annual head of household by: 8.

Household Production and the Excess Sensitivity of Consumption to by Marianne Baxter, Urban J. Jermann, This Robert, G. King, Matthew D. Shapiro, An Anonymous, Marianne Baxter, Urban J.

Jermann, Marianne Baxter, Urban J. Jermann - Current Income. Flavin –nds that the sensitivity of consumption to changes in current income is far greater than the PIH would suggest.2 This is known as fiexcess sensitivityfl. Campbell and Mankiw () take a di⁄erent approach to testing the random walk hypothesis (see pp.

of Romer™s Advanced Macroeconomics).File Size: 45KB. affects the sensitivity of consumption with respect to income shocks. If r ¼ 0 (the income process is not serially correlated), the marginal propensity to consume with respect to income shocks is r=(1 þ r).

This happens because, when r ¼ 0, all variations in income are transitory, and individuals consume only the annuity value of the income revision. and the sensitivity of consumption to income, and undertakes a battery of robustness tests.

Section 5 provides a discussion of alternative explanations. Section 6 o⁄ers some concluding remarks. 2 Database and Econometric Framework Database We examine the evolution of the sensitivity of consumption to income changes using a rich database.

Several studies have argued that the life-cycle permanent income hypothesis (LC-PIH) of Hall () breaks down because of the excess sensitivity of consumption to current income.

consumption is "excessively sensitive" to income, a con- can explain the apparent excess sensitivity of consump- tion to income. Journal of Business & Economic Statistics, July Permanent Income, Current Income, and Consumption i.)cov(AY, e,)), which is less than or equal to the R2 in File Size: KB.

Get this from a library. Household production and the excess sensitivity of consumption to current income. [Marianne Baxter; Urban J Jermann]. We test for precautionary saving and excess sensitivity of consumption to predicted income growth using a } panel survey of Italian households that has measures of subjective income and in#ation expectations.

During a survey held in early86 percent of respondents with an annual household income of more t U.S. dollars a year stated they had read at least one book in the previous 12 months. induce the prudent consumer to keep current consumption low and save. Therefore, if income actually increases, future consumption would track it, generating an excess sensitivity of consumption to income growth.

A test for prudence against standard PIH is then a. Empirically, we fi nd that consumption-income sensitivities affect asset allocation through the income hedging motive.

In particular, we show that the interaction between consumption-income sensitivity and the correlation of income growth to stock market returns is an important explanatory variable for households' stock market : Jawad M.

Addoum, Stefanos Delikouras, George M. Korniotis. Household Production and the Excess Sensitivity of Consumption to Current Income By Marianne Baxter and Urban J. JermannCited by: When forward-looking individuals face binding borrowing constraints, consumption will exhibit "excess sensitivity" to lagged variables which are correlated with income.

However, the predictive capacity of such variables for consumption growth should diminish when contemporaneous and future income terms are used as by: 6. significant excess sensitivity of consumption to income (John Shea, ).' Also, it is not clear how closely the resulting econometric predic-tions of income coincide with agents' actual expectations of income.

To avoid these difficulties this paper examines the response of household consumption to a par.Increase in Current Period Income Increase in Future Income Increase in the Real Interest Rate Excess sensitivity of Consumption While consumption is less volatile than income in the data, it is still not smooth enough to be in line with this theory Two reasons are given for this excess sensitivity of consumption: 1.

Imperfections in the credit File Size: 1MB.Household Production, Full Consumption and the Costs of Children Patricia Apps Faculty of Law, University of Sydney, and Economics, RSSS, Australian National University and IZA, Bonn Ray Rees Public Finance Institute, University of Munich Discussion Paper No.

May IZA P.O. Box D Bonn Germany Tel.: +