Carroll, Christopher; Otsuka, Misuzu; Slacalek, Jirka - National Bureau of Economic Research (NBER) - 2006
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...