This paper tests for the direct wealth effect versus an indirect wealth effect in aggregate data on U.S. households over four distinct sub-periods from 1952 through 2011. We use recent time series techniques to distinguish between the direct wealth effect from indirect channels which may operate...

Traditional vector autoregressions derive impulse responses using iterative techniques that may compound specification errors. Local projection techniques are robust to this problem, and Monte Carlo evidence suggests they provide reliable estimates of the true impulse responses. We use local...