The literature of unit roots and structural breaks has produced numerous tests that follow non-standard asymptotic distributions. This paper by fitting a seminonparametric model to them proposes a new simple way of calculating the p-values.
We present an intertemporal model of consumption and savings incorporating liquidity constraints and non separable preferences. We solve the problem numerically and characterize the optimal consumption behavior. We explore the traditional puzzles highlighted in the empirical literature as excess smoothness of consumption, its excess sensitivity to current income and its excess persistence. We show that a model with durability and liquidity constraints is able to reproduce some of the stylized facts. Next we show that some of the econometric tests are not robust and can mistake liquidity constraints for habit formation. Hence previous results establishing habit formation on US data should be interpreted with caution.
Cet article présente les développements récents de la théorie de la répartition intertemporelle de la consommation et de l'épargne. Nous partons du modele de revenu permanent a anticipations rationnelles. Ce modele ne permet pas de rendre compte de la faible volatilité de la consommation par rapport au revenu ou la sensibilité excessive aux variations du revenu courant. Les développements récents ont alors introduit plusieurs extensions. L'étude de comportements prudents permet d'étudier l'épargne de précaution, ainsi que de mieux prendre en compte les effets du risque sur la consommation. Les contraintes de liquidité permettent d'expliquer le lien entre consommation et revenu courant. Enfin, l'étude de fonctions d'utilité non séparables dans le temps permet d'expliquer la persistence de la consommation et de modéliser des habitudes de consommation ou l'achat de biens durables.
This paper studies under which conditions a cross-section regression yields unbiased estimates of the parameters of an individual dynamic model with fixed effects and individual-specific responses to macro shocks. We show that the OLS estimation of a system of non stationary variables on a cross-section yields estimates which converge to the true value when calendar time tends to infinity. We consider the case of a static demand system, for which we show, using French quarterly aggregate time-series, that budget shares, relative prices and the log of real total expenditure are I(1) and form a cointegrated system. We then compare these macro estimates to estimates obtained from three Family Expenditure Surveys. We compute from the macro estimates the short-run and the long-run elasticities and observe significant differences.
This paper studies the effects of subsidies on durable goods markets. In particular, we study a recent policy in France in which the governments of Balladur and Juppé subsidized the replacement of old cars with new ones. To study this policy, we construct a dynamic stochastic discrete choice model of car ownership at the household level. The resulting decision rules and equilibrium conditions are used to estimate, using aggregate data, the underlying parameters of the model. These policy functions are used to evaluate the short and long run effects of the French policies. We find that these policies do stimulate the automobile sector in the short run but, through the induced changes in the cross sectional distribution of car ages, create the basis for subsequent low activity. Further, while these policies increase government revenues in the short run, revenues in the long run are lower relative to a baseline without intervention.
This paper studies under which conditions a cross-section regression yields unbiased estimates of the parameters of an individual dynamic model with fixed effects and individual-specific responses to macro shocks. We show that the OLS estimation of a system of non stationary variables on a cross-section yields estimates which converge to the true value when calendar time tends to infinity.
We develop a framework for estimating the optimal expenditure of agents subject to unobserved liquidity constraints. Our framework allows us to estimate credit ceilings as well as preference parameters. We apply the framework to data on net resource transfers from private lenders to twenty-nine sovereign debtors during 1973-1993. We obtain reasonable estimates of the discount factor, elasticity of marginal utility of expenditure, and the credit ceiling for most countries. Our estimated credit ceilings rise quite regularly with income across the countries of our sample, and are positively associated with a country's trade, in line with several theoretical arguments. Our estimates imply that slightly less than half the countries in our sample were liquidity constrained during the 1970s. The fraction rose to around 80 per cent in the mid 1980s, and subsequently declined.
· Attitude Towards Risk and Discount Rates: An Empirical Study Using the CJD Crisis as an Experiment.
This paper uses the French "Mad Cow" crisis as an experiment to investigate the effect of a change in risk on households' behavior. The paper circumvents traditional problems of selectivity biases when assessing the effect of risk on behavior by exploiting the suddenness of the crisis and by using a panel data set following consumers before and after the crisis. The paper shows that the response to a change in risk is a non linear function of the level of the risk. The behaviors of the consumers when learning about the risks of CJD are partly explained by heterogenous and endogenous discount rates. Both individuals who are the most and the less exposed to the risk continue to engage in risky consumption when they learn about the risk. High risk consumers displays fatalistic behaviors and self-select themselves even more into the risk. A model based on endogenous discount rates is calibrated to back out the perceived risk by the households at the date of the crisis.
This paper shows that a model with rational consumers facing an endogenous discount rate is able to explain the consumption behavior of the French households during the "Mad Cow" crisis in March 1996. This paper circumvents traditional problems of selectivity biases when assessing the effect of risk on behavior by exploiting the suddenness of the crisis and by using a panel data set following consumers before and after the crisis. We show that the consumers' reaction were partly predictable and depended nonlinearly on the level of risk they had. Consumers with high risk tend to be fatalist. The model is able to reproduce the aggregate drop in consumption and to explain the heterogeneity at the micro level as well. We estimate the structural model at the micro level and identifies the discount rate function, revealed by the behavior of the consumers. The estimated model is used to evaluate the welfare gains and the willingness to pay for a risk reduction.