This paper uses housing returns to estimate the elasticity of intertemporal substitution (EIS) in consumption for fifteen advanced economies over the postwar period 1950-2015. As housing is the main asset for the majority of households, returns on housing are better suited to estimate the EIS...

Recessions and expansions are often caused or reinforced by developments in private consumption - the largest component of aggregate demand - which, as a result, varies over the business cycle. As such, an accurate measurement of the cyclical component of consumption and an understanding of its...

This paper uses a large historical dataset (1870-2016) for 16 industrial economies to show that during macroeconomic disasters (e.g., wars, pandemics, depressions) aggregate consumption and income are significantly less decoupled than during normal times. That is, during these times of turmoil,...

We investigate the importance of aggregate and consumer-specific or idiosyncratic labour income risk for aggregate consumption changes in the US over the period 1952-2001. Theoretically, the effect of labour income risk on consumption changes is decomposed into an aggregate and into an...

We derive a model in which a standard international capital asset pricing (ICAPM) model is nested within an ICAPM model with market imperfections. In the latter model an idiosyncratic stochastic factor affects the return of risky assets (over a risk-free rate) on top of the systematic component...

This paper examines the sources of stickiness in aggregate consumption growth. We first derive a dynamic consumption equation which encompasses many recent developments in consumption theory: habit formation, intertemporal substitution effects, consumption based on current income, and...

Micro data are used for the US over the period 1968 - 1992 to estimate time-varying specifications for the conditional variance of earnings of individual households. Specifications estimated are standard and quadratic ARCH and GARCH processes. The cross-sectional mean of the estimated...

We investigate the cyclicality of the private savings to GDP ratio for a panel of 19 OECD countries over the period 1971-2009. We find robust evidence that the private savings ratio is countercyclical. Three theories unambiguously predict a higher private savings ratio during recessions: a...

This paper presents a new testing method for the scapegoat model of exchange rates that aims to tighten the link between the theory on scapegoats and its empirical implementation. This new testing method consists of a number of steps. First, the exchange rate risk premium, the unobserved...

Macroeconomic disasters (wars, pandemics, depressions) are characterized by drastic shifts and increased volatility of the aggregate consumption to income ratio. By standard intertemporal budget constraint logic, this ratio is linked to expectations of future income and consumption growth rates....