消费-储蓄专题讲座.ppt

1、消费-储蓄专题讲座,陈斌开 中央财经大学 ,湘潭大学商学院,Class Arrangements,Lecture 1 Classic consumption theory Lecture 2 Liquidity constraint, precautionary saving and other extensions Lecture3 Numerical methods on consumption Lecture4 DID and its application,Why consumption-saving,数据来源：中国统计年鉴20052009；中国资金流量表历史资料：19922004,L

2、ecture 1:Classic Consumption Theory,1. Keynesian consumption theory 2. Modiglianlis Life Cycle Hypothesis(LCH） 3. Friedmans Permanent income Hypothesis(PIH） 4. A unified framework for LCH-PIH and its empirical test,1. Keynesian consumption theory,Consumption Function:,Critiques on Keynesian consumpt

3、ion function,Modigliani had a criticism of this model and asked, what about retirement? Friedman also criticized the Keynesian model saying that how about the household do not have income someday because of an accident?,2. Life Cycle Hypothesis (Brumberg and Modigliani,1954),Basic idea: consumers sm

4、ooth consumption over life cycle. Key implications: Consumption pattern over life cycle/ saving behavior over life cycle Saving and growth,Consumption pattern over Life Cycle in UK,Browning and Crossley(2001), UK,Is it a failure of LCH?,Possible Explanations: a. Rule of thumb (Keynesian Consumer). b

5、. Precautionary saving and liquidity constraint (Carroll and Summers, 1994) c. Labor supply and consumption complements (Heckman,1974). d. Demographics: Children (Deaton and Irish, 1985; Browning and Ejrnaes, 2000),LCH: Implication for retirement,Consumption Smoothing a. Retirement Characteristics:

6、labor supply, household size, composition, health status (Banks, Blundell and Tanner, 1998) b. Consumption versus expenditure (Aguiar and Hurst, 2005) Dissaving a. Medical Expenditure, life-span uncertainty (Palumbo, 1999) b. Bequest Motive (Hurd, 1987) c. Data problem,LCH: Implication for growth,De

7、mographicssaving-economic growth Economic growth-saving,3. Permanent Income Hypothesis (Friedman, 1957),Basic idea: consumption is based on permanent income rather than current income. Why Keynesian is wrong? 1. From cross section data, the APC decreases when income increases, which is predicted by

8、traditional Keynesian theory. However, this is not the case in time series data, which is contradict with Keynesian consumption theory, but consistent with PIH.,Permanent Income Hypothesis,The White/Non-White, Farm/Non-farm have different consumption function which is hard to explain by Keynesian th

9、eory.,Permanent Income Hypothesis,Key idea of PIH: Permanent income is the most important determinant of consumption, rather than current income; Discrimination of permanent income shocks and transitory income shocks. Strong policy implications.,4. A unified framework of LCH-PIH,In reality, both Mod

10、igliani and Friedman had the same criticism of the Keynesian model: consumers are not myopic and in actuality, they are forward looking. How to model a forward looking consumer?,Baseline Model,Baseline Model,F.O.C Euler Equation:,How to test LCH-PIH? (Hall, 1978),Hall tried to test the PIH-LCH using

11、 aggregate data. Assumption1: Quadratic utility, U(c) =-(/2)(c-c*)2 Assumption2: there are only one risk-free interest rate (1+r)=1 Assumption3: there are no liquidity constraints.,Hall (1978),Recall the Euler equation: ct = Etct+1. And rewrite this as: ct+1 = ct + t+1, Ett+1 = 0. We call consumptio

12、n a Martingale under this definition. If t+1 is i.i.d white noise, then c is a random walk.,Hall (1978),To test LCH-PIH, run the following OLS regression: ct+1 = 0 + 1ct + zt + t+1, where zt is a vector of variables in the information set at time t. Under the null, 0 = 0, 1 = 1, = 0. The last hypoth

13、esis says that no variables in the information set at time t should be able to predict ct+1 aside from ct.,Hall (1978),Hall (1978),Excess sensitivity Consumption is excess sensitive to the stock price, which is contradict with LCH-PIH. Hall favors a habit formation explanation for the excess sensiti

14、vity.,Critiques to Hall (1978),Are there Type I errors? (reject H0 when it is true) . Note that Halls main null hypothesis is that the LCH is true but there are auxiliary assumptions as well: quadratic utility, constant interest rate, (1+r) = 1. So could a failure of one of the auxiliary assumptions

15、 lead to a rejection of the main hypothesis?,Critiques to Hall (1978),YES: if (1 + r) 1. Then 0 = 0 and 1 = 1 need not be true. You will get a drift in consumption where if (1 + r) 1, consumption should optimally rise over time. So we would say that these two assumptions on 0 and 1 are NOT robust to

16、 small variations in this auxiliary assumption.,Critiques to Hall (1978), However, (1 + r) 1 would not generate a significant coefficient on zt so that = 0 is more robust to this auxiliary assumption. Now suppose that rt is time variant. Under the LCH, consumption growth should depend positively on

17、the interest rate. Thus if zt is correlated with rt+1 then we could estimate significant coefficients on the zs even if the LCH were true.,Critiques to Hall (1978),What about Type II errors (fail to reject H0 when it is false)? We say that a regression has HIGH POWER if it has a LOW probability of a

18、 type II error. In principal, any vector of zs in the information set could be included in Halls regression (lags of c, lags of y, lags of durable consumption, etc). But what makes a set of zs better than another set? Under just the null, all sets are equally valid. Under a POWER argument however, w

19、e would like to have the power to reject the null under plausible alternatives.,Critiques to Hall (1978), Consider the mypoia/Keynesian behavior or Liquidity constraints. Here ct+1 might be correlated with the predictive component of yt+1. So from a POWER standpoint, the optimal zs should be variabl

20、es that have substantial predictive power for future income growth., In fact, we know that lags of c and lags of y are lousy predictors of yt+1. In a univariate regression, aggregate output looks a lot like a random walk. However, stock prices, pt, are EXCELLENT predictors of income growth. Thus Hal

21、ls third regression is much more powerful than his first two. In fact, since regression (3) rejected the LCH, under a POWER argument, Halls paper should really say that the LCH model is a poor model of consumption.,Critiques to Hall (1978),Contribution of Hall (1978),A strong implication of PIH-LCH:

22、 consumption growth should not be predicted by past information. Euler Equation empirical test.,Flavin (1981),A stronger implication of PIH-LCH: consumption growth is not only a random walk, but a specific random walk. The power of test will be higher.,Flavin (1981),Flavin (1981),Model the stochasti

23、c income process is very important. when income is an ARMA process, the model can be written as,Flavin (1981),Flavin model income process as trend stationary Flavin(1981) also finds “excess sensitivity” of lagged income and “predictable” current income; that is LCH-PIH is rejected. Key contribution:

24、 a more power test.,Campbell and Deaton (1989),Critiques on Flavin(1981) 1. In reality, income is found to be a difference stationary process, rather than trend stationary,Campbell and Deaton (1989),Critiques on Flavin(1981) 2. Does the consumer predict future income like the econometrician modeled?

25、 The higher order information problem.,Campbell and Deaton (1989),Basic idea: saving should be a good predictor of future income change.,Campbell and Deaton (1989),Under CEQ and LC-PIH, The information of future income growth is revealed by the consumers saving behavior.,Campbell and Deaton (1989),W

26、e can use the following VAR income process:,Campbell and Deaton (1989),Based on the definition of saving, we have, The testable implication is:,Campbell and Deaton (1989),Campbell and Deaton (1989) rejected this restriction. Meanwhile, they found the consumption is “excess smoothness” to current inc

27、ome .,Critiques to time series literature,1. Aggregation across consumers. (Without CEQ restrictions; demographics) 2. Aggregation across commodities.(Attanasio and Weber, 1995),Micro evidence on LCH-PIH,Implication of LCH-PIH tested by most empirical paper based on micro evidence: predictable incom

28、e change will not affect consumption growth.,Shea (1995),Shea(1995): Sheas idea is to match PSID households to particular long term union contracts and then use public information on union contract provisions along with inflation forecasts to measure a variable called EDWAGE: Households expected per

29、centage change in real wages. Since union contracts often run for several years, we have a sample of households where their expected wage is determined (aside from inflation uncertainty).,Shea (1995),Econometric model:,Note the constant term is the same across households just due to the limited amou

30、nt of data. The zs are either EDWAGE in column 1, or lags of consumption or income in columns 2 thru 4.,Shea (1995),Shea (1995),When z = EDWAGE, we get a positive and significant 10% coefficient for . For other zs, we do not get significance. This suggests that the Halls zs have relatively little po

31、wer compared to EDWAGE. This is because EDWAGE is more strongly indicative of expected income growth, Et1yt,Hsieh(2003),This paper exploits a natural experiment provided by annual payments from the state of Alaskas Permanent Fund to every resident in the state of Alaska that should yield an unusuall

32、y powerful test of the LCH-PIH. These payments are large and clearly anticipated by Alaskan residents.,Hsieh(2003),Model specification:,Hsieh(2003),Hsieh(2003),This evidence suggest that households will take anticipated income changes into account in their consumption decisions when the income chang

33、es are large, regular, and easy to predict, but will not do so when they are small and irregular.,Related literature,The reaction of consumption (and saving) to changes in specific taxessuch as Souleles (1999), Parker (1999), Browning and Collado (2001), Shapiro and Slemrod (2003), Johnson, Parker a

34、nd Souleles (2006), Stephens (2003, 2006, 2008). The reaction of consumption (and saving) to changes in pension entitlements (Attanasio and Brugiavini, 2003, Attanasio and Rohwedder, 2003, Miniaci and Weber, 1999).,Lecture 2: Extensions to LCH-PIH,1. Precautionary saving 2. Liquidity Constraint 3. H

35、abit formation 4. Durable/Non-durables,1. Precautionary Saving,Basic idea Simple LCH-PIH model predicts that future income will affect current consumption, how about future uncertainty?,Baseline Model,Baseline Model,Baseline Model,Baseline Model,The difference between CEQ and the above model? Intuit

36、ion? Exercise: derive the above equation by Talyor expansion,Empirical Test of Precautionary saving,Key problem of empirics: measurement of risk, exogeneity of risk, variability of risk). How to measure risk? Income variance, consumption variance, subjective measures. Exogenous risk? The role of pre

37、ference, asset return,Carroll (1994),Will future income affect current consumption? If so, LCH-PIH; If not? Will future income risk affect current consumption? If so, Precautionary saving,Carroll (1994),Empirical model Under CEQ,Carroll (1994),Carroll (1994),Test for precautionary saving Empirical m

38、odel,Carroll (1994),Carroll (1994),Main findings: 1. Future income do not have same effect on consumption as current income, which is not consistent with simple LCH-PIH model. 2. Future income risk has strong effect on consumption, which is contradict with Keynesian model. 3. The findings favor the

39、precautionary saving theory.,Carroll(1997),Precautionary saving and consumption puzzles: 1. “consumption/income parallel” documented by Carroll and Summers 1991 and Carroll 1994: when consumption is aggregated by groups or by whole economies, it closely parallels growth in income over periods of mor

40、e than a few years. The consumption/ income parallel, inconsistent with the standard LC/PIH framework, is explained in the buffer-stock model as the result of consumers impatience and their prudent unwillingness to borrow.,Carroll(1997),2. The second fact is the “consumption/income divergence” that

41、emerges from microeconomic consumer surveys: for individual households, consumption is often far from current income, implying that the aggregate consumption/income parallel does not arise from high frequency tracking of consumption to income at the household level. The consumption/ Income divergenc

42、e, inconsistent with the Keynesian model, is explained with essentially the same logic Friedman used long ago: consumption does not respond one-for-one to transitory shocks to income because assets are used to buffer consumption against such shocks.,Carroll(1997),3. The final set of stylized facts i

43、s about the patterns of wealth accumulation over the lifetime. Under PIH-LCH, unexpected productivity slowdown will result in large wealth accumulation. High volatility of liquid asset,Fuchs-Schndeln and Schndeln (2005),The key problem of Carroll (1994) is the exogenous of income risk, as occupation

44、al choice is endogenous. Is there any exogenous occupational choice? And it is also variable? A qusi-experiment: German reunification,Fuchs-Schndeln and Schndeln (2005),Identification strategy: the saving difference between civil servants and other occupations. Identification assumption: First, civi

45、l servants face significantly lower labor income risk than non-civil servants. Second, self selection into occupations according to risk aversion can be excluded to a large extent for individuals who chose their jobs in the former GDR.,Fuchs-Schndeln and Schndeln (2005),Model Specification,Fuchs-Sch

46、ndeln and Schndeln (2005),2. Liquidity constraint,The standard model sketched above assumes that individuals can borrow against future labor income to finance current consumption at the same rate at which they can lend. Of course, if this is not the case, the basic model has to be amended in that th

47、e maximization problem has to take into account the additional constraint. It has now become customary to interpret evidence of excess sensitivity of consumption growth to labor income as an indication of liquidity constraints, by which it is usually meant the presence of some imperfection in financ

48、ial markets that prevents people from borrowing.,Baseline Model,Here, is broadly defined, it is the lending rate for the lender, the borrowing rate for the borrower, and intermediate rate if there is no borrowing and lending. The key problem is that is almost not observable.,Baseline Model,Baseline

49、model,Features of liquidity constraint consumer,1. Consumption depends on current income. 2. The presence of future liquidity constraints may lead agents to behave as though they are less forward looking, and we may observe agents smoothing over short run, but not long over the long run.,Empirics of Liquidity Constraint,Zeldes (1989),Basic idea: Zeldes tests for liquidity constaints (LC) in the PSID. Liquidity constraints prevent borrowing but should not prevent dissaving. So if LCs are present, the LCH Euler equation may fail for h