On the Stability of the Wealth Effect

Fernando Alexandre (), Pedro Bação and Vasco J. Gabriel

No 2005-17, GEMF Working Papers from GEMF - Faculdade de Economia, Universidade de Coimbra

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)
Date: 2005
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Related works:
Working Paper: On the Stability of the Wealth Effect (2005)
Working Paper: On the Stablity of the Wealth Effect (2005)
Working Paper: On the stability of the wealth effect (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:gmf:wpaper:2005-17

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