Latest documents http://publikationen.ub.uni-frankfurt.de/index/index/ Fri, 23 Feb 2007 15:03:02 +0100 Fri, 23 Feb 2007 15:03:02 +0100 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1616 This paper presents a simple new method for estimating the size of ‘wealth effects’ on aggregate consumption. The method exploits the well-documented sluggishness of consumption growth (often interpreted as ‘habits’ in the asset pricing literature) to distinguish between short-run and long-run wealth effects. In U.S. data, we estimate that the immediate (next-quarter) marginal propensity to consume from a $1 change in housing wealth is about 2 cents, with a final long-run effect around 9 cents. Consistent with several recent studies, we find a housing wealth effect that is substantially larger than the stock wealth effect. We believe that our approach is preferable to the currently popular cointegrationbased estimation methods, because neither theory nor evidence justifies faith in the existence of a stable cointegrating vector. JEL Classification: E21, E32, C22 Christopher D. Carroll; Misuzu Otsuka; Jirka Slacalek workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1616 Fri, 23 Feb 2007 15:03:02 +0100 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/2801 This is an entry for The New Palgrave Dictionary of Economics, 2nd Ed. Klassifikation: C61, D11, E21 Christopher D. Carroll; Miles S. Kimball workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/2801 Thu, 04 May 2006 08:31:02 +0200