On the Stablity of the Wealth Effect

Fernando Alexandre (), Pedro Bação and Vasco Gabriel

No 14/2005, NIPE Working Papers from NIPE - Universidade do Minho

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)
Date: 2005
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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 Stability of the Wealth Effect (2005)
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