Euler consumption equation with non-separable preferences over consumption and leisure and collateral constraints
Kilponen, Juha (08.03.2009)
Numero
9/2009Julkaisija
Bank of Finland
2009
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-20140807273Tiivistelmä
This paper derives and estimates an aggregate Euler consumption equation which allows one to compare the importance of collateral constraints and non-separability of consumption and leisure as alternative sources of excess sensitivity of consumption to current income. Estimation results suggest that during a severe financial distress both non-separability and collateral constraints are needed to capture excess sensitivity of consumption to current economic conditions. During more tranquil times, evidence on collateral effects is more limited and non-separability is sufficient to make the Euler consumption equation agree well with the data. Keywords housing, financial distress, excess sensitivity of consumption JEL classification numbers E21, E32, E44
Julkaisuhuomautus
Published in B.E. Journal of Macroeconomics, Volume 12, Issue 1, 2012, Article 10