Volatility in asset prices and long-run wealth effect estimates
Alexandre, F, Gabriel, VJ and Bação, P (2007) Volatility in asset prices and long-run wealth effect estimates Economic Modelling, 24 (6). pp. 1048-1064.
We argue that the equation commonly used in the estimation of the wealth effect on consumption might be unsuitable for that purpose. In particular, if the usual assumptions are employed, the derivation of the equation implies that the wealth effect is indeterminate. Furthermore, it implies that the estimate of the wealth effect should decrease when asset wealth volatility increases. Estimation of a Markov-switching model of the usual long-run aggregate consumption equation provides evidence favourable to the indeterminacy hypothesis. © 2007 Elsevier B.V. All rights reserved.
|Divisions :||Faculty of Arts and Social Sciences > School of Economics|
|Date :||November 2007|
|Identification Number :||https://doi.org/10.1016/j.econmod.2007.04.004|
|Additional Information :||NOTICE: this is the author’s version of a work that was accepted for publication in Economic Modelling. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economic Modelling, 24(6), November 2006, DOI 10.1016/j.econmod.2007.04.004.|
|Depositing User :||Symplectic Elements|
|Date Deposited :||16 Jul 2012 09:20|
|Last Modified :||09 Jun 2014 13:18|
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