Please use this identifier to cite or link to this item: http://hdl.handle.net/10316/5483
Title: Volatility in asset prices and long-run wealth effect estimates
Authors: Alexandre, Fernando 
Bação, Pedro 
Gabriel, Vasco J. 
Keywords: Parameter instability; Markov switching; Consumption; Wealth effect
Issue Date: 2007
Citation: Economic Modelling. 24:6 (2007) 1048-1064
Abstract: We argue that the equation commonly used in the estimation of the wealth effect on consumption might be unsuitable for that purpose. In particular, if the usual assumptions are employed, the derivation of the equation implies that the wealth effect is indeterminate. Furthermore, it implies that the estimate of the wealth effect should decrease when asset wealth volatility increases. Estimation of a Markov-switching model of the usual long-run aggregate consumption equation provides evidence favourable to the indeterminacy hypothesis.
URI: http://hdl.handle.net/10316/5483
Rights: openAccess
Appears in Collections:FEUC- Artigos em Revistas Internacionais

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