Volatility in asset prices and long-run wealth effect estimates
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Alexandre, F, Gabriel, VJ and Bação, P (2007) Volatility in asset prices and long-run wealth effect estimates Economic Modelling, 24 (6). 1048 - 1064. ISSN 0264-9993
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Official URL: http://dx.doi.org/10.1016/j.econmod.2007.04.004
Abstract
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.
| Item Type: | Article |
|---|---|
| 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. |
| Divisions: | Faculty of Business, Economics and Law > Economics |
| ID Code: | 436680 |
| Deposited By: | Symplectic Elements |
| Deposited On: | 16 Jul 2012 10:20 |
| Last Modified: | 28 Feb 2013 02:34 |
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