On the Stability of the Wealth Effect

Fernando Alexandre (falex@eeg.uminho.pt), Pedro Bação and Vasco Gabriel

No 1405, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: 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 movements 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.

Keywords: Parameter instability; Markov switching; Consumption; Wealth effect (search for similar items in EconPapers)
JEL-codes: E21 E44 G10 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2005-06
New Economics Papers: this item is included in nep-fin and nep-mac
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https://repec.som.surrey.ac.uk2005/DP14-05.pdf (application/pdf)

Related works:
Working Paper: On the stability of the wealth effect (2006)
Working Paper: On the Stability of the Wealth Effect (2005)
Working Paper: On the Stablity of the Wealth Effect (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:1405

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