ON WEALTH VOLATILITY, ASYMMETRIES AND THE AVERAGE PROPENSITY TO CONSUME IN THE UNITED STATES

Mark Holmes () and Xin Shen ()

Applied Econometrics and International Development, 2015, vol. 15, issue 1, 69-78

Abstract: We explore the relationship between the volatility of wealth and consumption expenditure in the US. Using a GARCH-in-mean VAR model, we find that increases in the volatility of the wealth to income ratio leads to a fall in the average propensity to consume. Further analysis suggests that the effects of negative shocks to the wealth to income ratio have more persistence than equal but opposite positive shocks.

Keywords: volatility; average propensity to consume; wealth; asymmetries. (search for similar items in EconPapers)
JEL-codes: C3 E1 E2 (search for similar items in EconPapers)
Date: 2015
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