The Spirit of Capitalism, Precautionary Savings, and Consumption

Yulei Luo (), William Smith and Heng-Fu Zou ()
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William Smith: Department of Economics at Fogelman College of Business and Economics, University of Memphis

No 274, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: Recent research has shown that the "spirit of capitalism"¡ªa preference for wealth itself, in addition to consumption¡ªhas important implications for growth and asset pricing. This paper explores how the spirit of capitalism affects saving and consumption behavior. We demonstrate that the spirit of capitalism may reduce the importance of precautionary savings. It can also explain the excess sensitivity puzzle: the spirit of capitalism causes dramatic deviations from a random walk. It may also offer a partial explanation of the excess smoothness puzzle.

Keywords: the spirit of capitalism; consumption and saving behavior; the sensitivity and smoothness of consumption (search for similar items in EconPapers)
JEL-codes: C61 D91 E21 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2006-11-08
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Citations: View citations in EconPapers (1)

Published in Journal of Money, Credit and Banking, Volume 41, Issue 2-3, pages 543¨C554, March-April 2009

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Related works:
Journal Article: The Spirit of Capitalism, Precautionary Savings, and Consumption (2009)
Journal Article: The Spirit of Capitalism, Precautionary Savings, and Consumption (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:274

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