This paper investigates how different income shocks shape consumption dynamics over the business cycle. First, we break … in aggregate consumption over the two most recent crises. We find that the income shocks experienced during the 2008 …, with the 2011-2012 shocks being perceived as more permanent. This helps explain why consumption falls less during the …

This paper uses housing returns to estimate the elasticity of intertemporal substitution (EIS) in consumption for ….e., equity and bill returns. An estimable regression equation for aggregate consumption growth and returns is obtained from the … aggregation of the consumption Euler equations of heterogeneous agents. As the regression equation includes unobserved omitted …