Imperfect insurance and differing propensities to consume across households

Article Abstract:

An examination of the difference in marginal propensity to consume (MPC) out of idiosyncratic income shocks between high-wealth and low-wealth households revealed that the MPC of low-wealth households is lower than that of high-wealth ones. This difference is attributed to precautionary savings behavior and liquidity constraints. It was also found that the MPC of the very-low-wealth group is smaller when low-wealth households are divided further into subgroups, suggesting that means-tested safety net programs provide insurance against income shocks. Households were likewise found to perceive housing equity as illiquid when two different measures of wealth are used.

Economic aspects, Consumer behavior, Households

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Global versus country-specific productivity shocks and the current account

Article Abstract:

An empirical model of investment and the current account using a tractable approach to structural estimation was developed to explain the consistent correlation between investment and the current account deficit. The model used data from G-7 countries for the period 1961-1990. It shows that investment consistently reacts positively to country-specific and global productivity shocks, while the current account reacts negatively to country-specific shocks and does not react at all to global shocks.

Balance of payments, Productivity accounting

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Transitory variation in investment and output

Article Abstract:

An analysis of the transitory factor in investment and output models is presented. The analysis focuses on the permanent-income model and considers transitory variation in the GNP. The study then observes investment variation and relates this to consumption patterns. It is shown thatconsumption undergoes a random walk process while investment follows consumption movements one-on-one.

Gross national product, Permanent income theory

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