Wealth Shocks and Macroeconomic Dynamics PDF Download

Author: Daniel Cooper
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Vighneswara Swamy
Publisher:
ISBN:
Category :
Languages : en
Pages : 38

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The wealth effects on consumption are a subject of continuing interest to economists. The conventional wisdom states that fluctuations in household wealth have caused major fluctuations in economic activity. This study analyses the macroeconomic dynamics of wealth effects in India and examines the nexus between the changes in housing wealth, financial wealth, and consumer spending. Using the quarterly data for the period 2005:1-2016:1, I estimate vector autoregression models and vector error-correction models, relating consumption to income and wealth measures. I find a statistically significant and rather large effect of housing wealth upon household consumption. The results show that (i) wealth effects are statistically significant and comparatively substantial in magnitude (ii) housing wealth effects tend to be greater while stock market wealth effects are considerable (iii) private consumption responses to the shocks to housing market wealth are relatively stronger than to the shocks in stock market wealth. There is a bidirectional causality running from private consumption to the two wealth forms and vice versa. Overall, the private consumption expenditure response to the changes in different wealth forms is observed to be substantial and significant.

Author: Daniel Cooper
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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The effect of wealth on consumption is an issue of long-standing interest to economists. Conventional wisdom suggests that fluctuations in household wealth have driven major swings in economic activity both in the United States and abroad. This paper considers the so-called consumption wealth effects. There is an extensive existing literature on wealth effects that has yielded some insights. For example, research has documented the relationship between aggregate household wealth and aggregate consumption over time, and a large number of household-level studies suggest that wealth effects are larger for households facing credit constraints. However, there are also many unresolved issues regarding the influence of household wealth on consumption. We review the most important of these issues and argue that there is a need for much more research in these areas as well as better data sources for conducting such analysis.

Author: Mr.Christopher Carroll
Publisher: International Monetary Fund
ISBN: 1475505698
Category : Business & Economics
Languages : en
Pages : 47

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We argue that the U.S. personal saving rate’s long stability (from the 1960s through the early 1980s), subsequent steady decline (1980s - 2007), and recent substantial increase (2008 - 2011) can all be interpreted using a parsimonious ‘buffer stock’ model of optimal consumption in the presence of labor income uncertainty and credit constraints. Saving in the model is affected by the gap between ‘target’ and actual wealth, with the target wealth determined by credit conditions and uncertainty. An estimated structural version of the model suggests that increased credit availability accounts for most of the saving rate’s long-term decline, while fluctuations in net wealth and uncertainty capture the bulk of the business-cycle variation.

Author: Martin Lettau
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 0

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Three shocks, distinguished by whether their effects are permanent or transitory, are identified to characterize the post-war dynamics of aggregate consumer spending, labor earnings, and household wealth. The first shock accounts for virtually all of the variation in consumption and has effects akin to a permanent total factor productivity shock in canonical frictionless macroeconomic models. The second shock underlies the bulk of fluctuations in labor income, accounting for 76% of its variation. This shock permanently reallocates rewards between shareholders and workers but leaves consumption unaffected. Over the last 25 years, the cumulative effect of this shock has persistently boosted stock market wealth and persistently lowered labor earnings. The third shock is a persistent but transitory innovation that accounts for the vast majority of quarterly fluctuations in asset values but has a negligible impact on consumption and labor earnings at all horizons. We show that the 2000-02 asset market crash was the result of a negative transitory wealth shock, which predominantly affected stock market wealth. By contrast, the 2007-09 crash was accompanied by a string of large negative realizations in both the transitory shock and the permanent productivity shock, with the latter having especially important implications for housing wealth.

Author: Pavlos V. Karadeloglou
Publisher: Palgrave MacMillan
ISBN:
Category : Business & Economics
Languages : en
Pages : 272

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This book examines the numerous aspects of exchange rates and the dynamics of macroeconomics, focusing on the PPP puzzle, volatility, levels, with an exploration of the real exchange rate misalignment of the Central European countries single equation approach, an examination of the real equilibrium exchange rate in China, exchange rate dynamics and pass-through effects in Russia and Hungary, and structural shocks on economies.

Author: John B. Taylor
Publisher: North Holland
ISBN:
Category : Business & Economics
Languages : en
Pages : 596

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This text aims to provide a survey of the state of knowledge in the broad area that includes the theories and facts of economic growth and economic fluctuations, as well as the consequences of monetary and fiscal policies for general economic conditions.

Author: Viola Angelini
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Laurent Ferrara
Publisher: Springer
ISBN: 3319790757
Category : Business & Economics
Languages : en
Pages : 300

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This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.

Author: Martin Eichenbaum
Publisher: University of Chicago Press Journals
ISBN: 9780226577661
Category : Business & Economics
Languages : en
Pages : 0

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Volume 32 of the NBER Macroeconomics Annual features six theoretical and empirical studies of important issues in contemporary macroeconomics, and a keynote address by former IMF chief economist Olivier Blanchard. In one study, SeHyoun Ahn, Greg Kaplan, Benjamin Moll, Thomas Winberry, and Christian Wolf examine the dynamics of consumption expenditures in non-representative-agent macroeconomic models. In another, John Cochrane asks which macro models most naturally explain the post-financial-crisis macroeconomic environment, which is characterized by the co-existence of low and nonvolatile inflation rates, near-zero short-term interest rates, and an explosion in monetary aggregates. Manuel Adelino, Antoinette Schoar, and Felipe Severino examine the causes of the lending boom that precipitated the recent U.S. financial crisis and Great Recession. Steven Durlauf and Ananth Seshadri investigate whether increases in income inequality cause lower levels of economic mobility and opportunity. Charles Manski explores the formation of expectations, considering the efficacy of directly measuring beliefs through surveys as an alternative to making the assumption of rational expectations. In the final research paper, Efraim Benmelech and Nittai Bergman analyze the sharp declines in debt issuance and the evaporation of market liquidity that coincide with most financial crises. Blanchard’s keynote address discusses which distortions are central to understanding short-run macroeconomic fluctuations.