Testing for Asymmetry in the Response of Consumption to Changes in Wealth: Evidence from Australia

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The responses of consumption to changes in wealth have been much debated and are of increasing significance in developed economies. This paper uses data from the US and Australia to test whether there is evidence of asymmetric effects playing a role in such responses. The potential for asymmetric responses to monetary policy (tightenings and loosenings) has been long known since the early work of Cover (1992, in this paper we draw on a variety of explanations for asymmetric consumption responses and then test for such effects in the context of a cointegrated system

Keywords: Wealth Effects, Error Correction Model, Asymmetry
Stream: Economics and Management
Presentation Type: Paper Presentation in English
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Prof. Garry MacDonald

Professor, Curtin Business School, Curtin University
Perth, Western Australia, Australia

Ref: I08P0593