We show that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and drive asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences. A single state variable drives the conditional cross-sectional moments of...

We present evidence that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and drive asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences. A single state variable drives the conditional cross-sectional...

Private consumption demand falls in response to increased unemployment risk during a recession, as households increase their precautionary savings and postpone irreversible durable investments. The postponement e ect is seven times as large as the precautionary-savings e ect in a calibrated bu...