Ability to consume versus willingness to consume: the role of nonlinearities

Petar Sorić

Empirica, 2022, vol. 49, issue 3, No 4, 663-689

Abstract: Abstract Following the tradition of George Katona, this study utilizes consumer surveys to extract indicators of ability to consume and willingness to consume for 28 European economies. A function of durables consumption is specified, acknowledging the potentially important role of nonlinearities, which have insofar been neglected in the literature. The estimated state space models reveal that the effects of both stated subjective concepts exhibit considerable time-variability. Their impact seems to be heavily dependent on the business cycle, with an intensification of the observed relationship during recessions. Further on, nonlinear autoregressive distributed lag modelling indicates significant asymmetries in the impact of ability to consume: household expenditure generally reacts more strongly to negative than to positive changes of the stated variable. To that end, the presented specifications corroborate the main postulate of prospect theory. On the other hand, willingness to consume does not exhibit such pronounced asymmetry. Finally, the detected nonlinearities are exclusively transitory, reaffirming animal spirits as a short-run predictor of economic behavior.

Keywords: Ability to consume; Willingness to consume; Personal consumption; Time-varying parameters; Nonlinear autoregressive distributed lag model (search for similar items in EconPapers)
JEL-codes: C32 D12 E32 E71 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10663-022-09535-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:empiri:v:49:y:2022:i:3:d:10.1007_s10663-022-09535-y

Ordering information: This journal article can be ordered from
http://www.springer. ... ration/journal/10663

DOI: 10.1007/s10663-022-09535-y

Access Statistics for this article

Empirica is currently edited by Fritz Breuss and Fritz Breuss

More articles in Empirica from Springer, Austrian Institute for Economic Research, Austrian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().