On the stability of the wealth effect

• Autor(es): Alexandre, Fernando ; Bação, Pedro ; Gabriel, Vasco J.
• Data: 2005
• Identificador Persistente: http://hdl.handle.net/1822/3845
• Origem: RepositóriUM - Universidade do Minho
• Assunto(s): Parameter instability; Markov switching; Consumption; Wealth effect
• Tipo de Documento: Research paper
• Idioma: Inglês

Descrição

Evidence of instability of the wealth effect in the USA is presented through the estimation of a Markov switching model of the long-run aggregate consumption function. The dating of the regimes appears to bear relation to ovements in asset prices. A model-based explanation of the findings is suggested, highlighting the importance of the short-run relation between consumption, income and wealth in explaining the estimated long-run coefficients.