Essays on aggregate and individual consumption fluctuations
This thesis consists of three essays on aggregate and individual consumption fluctuations. Chapter 1 develops a quantitative model to explore aggregate and individual consumption dynamics when the income process exhibits regime-switching features, and compares its performance with the conventional linear model. For this purpose, I consider an economy populated by a large number of consumers whose incomes are subject to both aggregate and idiosyncratic shocks. The notable element of the model is that a latent regime-switching stochastic variable governs both the trend growth of the aggregate component and the counter-cyclical variances of the idiosyncratic components in individual earnings. I demonstrate that the model can provide a reasonable description of the cyclical behavior of actual consumption fluctuations, and can successfully replicate some key empirical properties of aggregate consumption growth, such as smaller volatility than income growth, greater volatility in recessions than in expansions, and a negatively skewed and leptokurtic distribution, while the typical linear model fails to do so.
Year of publication: |
2006
|
---|---|
Authors: | Hwang, Youngjin |
Other Persons: | Olivier J. Blanchard and Guido K. Kuersteiner. (contributor) |
Institutions: | Massachusetts Institute of Technology. Dept. of Economics. (contributor) |
Publisher: |
Massachusetts Institute of Technology |
Saved in:
freely available
Saved in favorites
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