We show that countries that take on more international risk are rewarded with higher expected consumption growth. International risk is defined as the beta of a country’s consumption growth with world consumption growth. High-beta countries hold more foreign assets, as predicted by the theory....

How predictable are personal income tax rates in the U.S., and does household spending respond to news about future taxes even before the rates change? To answer these questions, this paper uses novel historical high-frequency data of tax-exempt municipal bonds and develops a model of the term...

Employing a unique quasi-experiment -- spillovers caused by the imposition of local house purchase restrictions to nearby non-regulated cities, we study the effects of out-of-town housing demand and policy spillovers. This quasi-experiment induces sharp increases in house prices but not local...

Priceless consumption (PC) is a type of consumption that is not available in the marketplace and, therefore, is absent from aggregate consumption measures. We propose an estimation methodology to recover PC from its effects on the composition of observable consumption. The estimation shows that...

Using the Michigan Survey of Consumers, we provide evidence that consumers' beliefs about current and future aggregate durable expenditure predict expected returns. We rationalize this finding through an asset pricing model with recursive preferences over non-durable and durable goods and belief...

We derive and test a consumption-based intertemporal asset pricing model in which an asset earns a risk premium if it performs poorly when expected future consumption growth deteriorates. The predictability of consumption growth combined with the recursive preference delivers news about future...

During the Great Recession, the collapse of consumption across the U.S. varied greatly but systematically with house-price declines. We find that financial distress among U.S. households amplified the sensitivity of consumption to house-price shocks. We uncover two essential facts: (1) the...

The cross-sectional distribution of consumption is commonly approximated by the lognormal distribution. This note shows that consumption is better described by the double Pareto-lognormal distribution (dPlN), which has a lognormal body with two Pareto tails and arises as the stationary...

This paper employs Swedish data on households' stock holdings to investigate how consumption responds to changes in stock market returns. We instrument the actual capital gains and dividend payments with past portfolio weights. Unrealized capital gains lead to a marginal propensity to consume...

This paper employs Swedish data containing security level information on households' stock holdings to investigate how consumption responds to changes in stock market returns. We exploit households' portfolio weights in previous years as an instrument for actual capital gains and dividends...