Euler consumption equation with non-separable preferences over consumption and leisure and collateral constraints

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Title: Euler consumption equation with non-separable preferences over consumption and leisure and collateral constraints
ISBN: 978-952-462-501-2
978-952-462-500-5
Author: Kilponen, Juha
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2009
Series number: 9/2009
Year of publication: 2009
Publication date: 8.3.2009
Published in: Published in B.E. Journal of Macroeconomics, Volume 12, Issue 1, 2012, Article 10
DOI: 10.1515/1935-1690.2061
Pages: 32 s.
Keywords: kulutus; asuntomarkkinat; vakuudet; kotitaloudet; työaika; Suomi; vapaa-aika; rahoitusrajoitteet; Euler-yhtälö
JEL: E21; E32; E44
Abstract: 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
Note: Ilmestynyt myös B.E. Journal of macroeconomics 2012 ; 12 ; 1.
Rights: https://helda.helsinki.fi/bof/copyright


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