Using Consumer Expenditure Survey data from 1986 to recent years, this study examines whether or not the precautionary saving motive is an important force governing consumer behavior. A time series model is obtained by aggregating a log-linearized Euler equation across households, in which the...

China's fast growth is perceived as a major determinant of its savings glut that contributes to global imbalances, but China's income inequality has been largely overlooked as the economy moves rapidly toward the Kuznets curve peak. This paper provides a new explanation for the complex issue of...

This paper develops and estimates an open-economy dynamic stochastic general equilibrium (DSGE) model of the Hong Kong economy. The model features short-run price rigidities generated by monopolistic competition and staggered reoptimization. We devote special attention to asset prices and wealth...

We explore the role of habit formation in housing in explaining the life-cycle household allocations. Empirical studies about households in the U.S. reveal that the housing profile increases monotonically until age mid-60s and then flattens out. The model is realistically calibrated and solved...

This paper empirically investigates the ability of a real business-cycle model with nonseparabilities in consumption and leisure and external habits both in consumption and leisure to fit the postwar US data. The results indicate a strong but fast-dying habit in leisure, and a somewhat weaker...

This paper studies the empirical relationship between consumption and saving under two different sources of uncertainty: financial risk and environmental risk. The analysis is carried out using time series data for six advanced economies in the period 1965–2007.

This study proposes a cumulative error correction model where the summing weights follow a geometrically decreasing function of prior deviations from the equilibrium and are estimated from the data. It is shown that this approach nests both the traditional error correction model – where no...

This article examines the existence and stability of the consumption function in the United States of America (US) beginning in the 1950s. In order to obtain a stable long run relationship, we have introduced two innovative elements into the analysis of the life-cycle of the consumption function...

Some empirical studies firmly reveal that people tend to form overly pessimistic survival expectations for relatively less distant ages and overly optimistic survival expectations for relatively more distant ages. We incorporate this observation into a life-cycle continuous time...

This paper estimates money demand equations for the euro area, the US and the UK using a quantile regression framework and a smooth-transition regression. The quantile regression technique highlights that: (i) the income and the interest rate semi-elasticities are significantly different from...