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• Main Authors: Nan-Hung Liu, 劉南宏
• Other Authors: 徐之強
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/03085328078189038919

碩士 === 國立中央大學 === 經濟學研究所 === 95 === The empirical linkage between wealth and consumption is a classic research problem at the intersection of finance and macroeconomics. Conventional estimates are find that significant movements in wealth will be associated with movements in consumer spending, either contemporaneously or subsequently. Contrary to conventional wisdom, Lettau and Ludvigson (2004) find that a surprisingly small fraction of the variation in household net worth is related to variation in aggregate consumer spending. They argue that conventional estimates do not distinguish trend from cycle in asset values. Therefore it leads to estimates of the wealth effect greatly overstate the response of consumption to a change in wealth. Lettau and Ludvigson (2004) use cointegration approach and error correction model to discuss the consumption-wealth relationship. But they did not consider the assymmetry in the dynamics of the equilibrium errors. For this purpose, we use the Markov-switching common trends model of Camacho (2005). This leads to a decomposition of the series into permanent and transitory components that behave asymmetrically within the business cycles. We find that consider the assymmetry in the dynamics of the equilibrium errors, most variation in consumption is dominated by permanent shocks, but most variation in household net worth is generated by transitory innovations. Finally, in line with Lettau and Ludvigson (2004), we find most changes in wealth are transitory and are uncorrelated with consumption.