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Disaggregate income and wealth effects in the largest euro area countries

Gabe de Bondt, Arne Gieseck, Zivile Zekaite () and Pablo Herrero

No 2343, Working Paper Series from European Central Bank

Abstract: This study extends a thick modelling tool for aggregated euro area real private consumption of de Bondt et al. (2019) to the four largest euro area countries. The suite of error correction models performs well in and out of sample. The ranges and averages of estimated elasticities are, however, sensitive to the exact model specification. We also show that decomposing disposable income into labour, property and transfer income is essential for understanding and forecasting consumption. Finally, substantial crosscountry heterogeneity in marginal propensities to consume out of income and wealth components calls for caution when interpreting aggregate euro area developments. JEL Classification: C53, D12, E21, E27

Keywords: income; private consumption; thick modelling; wealth (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-eec, nep-mac and nep-ore
Note: 337418
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