Recent empirical work on the strength of precautionary saving has yielded widely varying conclusions. The mixed findings may reflect a number of difficulties in proxying uncertainty, executing instrumental variables estimation, and incorporating theoretical restrictions into empirical models....

This is an entry for The New Palgrave Dictionary of Economics, 2nd Ed.

This paper presents a simple new method for estimating the size of ‘wealth effects?on aggregate consumption. The method exploits the well-documented sluggishness of consumption growth (often interpreted as ‘habits?in the asset pricing literature) to distinguish between short-run and long-run...

<DIV>Robust and reliable measures of consumer expenditures are essential for analyzing aggregate economic activity and for measuring differences in household circumstances. Many countries, including the United States, are embarking on ambitious projects to redesign surveys of consumer expenditures,...</div>

populated by buffer stock consumers.

Using a standard, realistically calibrated model of buffer-stock saving with transitory and permanent income shocks, we study how cross-country differences in the wealth distribution and household income dynamics affect the marginal propensity to consume out of transitory shocks (MPC). Across...