Consumption plays a significant role in determining the size of the multiplier and the dynamic effects of the economy shock. It also constitutes the largest component of the aggregate expenditure of an economy. As a result, economists have propounded theories in a bid to explain the determinants...

We build a New Keynesian business-cycle model with rich household heterogeneity. A central feature is that matching frictions render labor-market risk countercyclical and endogenous to monetary policy. Our main result is that a majority of households prefer substantial stabilization of...

Since Hayek's pioneering work in the 1930's, the Austrian business cycle theory has been presented as a disequilibrium theory populated by less-than-perfectly rational agents. In contrast, we maintain that (1) the Austrian business cycle theory is consistent with rational expectations and (2)...

We attempt to disentangle income and wealth effects on consumption by disaggregating both the different types of income and wealth. We estimate a consumption function for a panel of quarterly data for 14 advanced economies spanning 1998 to 2012, using an error correction specification. We find a...