The Consumption Response to Income Changes

Document Outline

• The Consumption Response to Income Changes
  • Introduction
  • Theoretical predictions
    • The Response of Consumption to Predictable Income Changes
    • The Response of Consumption to Unpredictable Income Shocks
    • Precautionary Saving
    • Credit and Insurance Markets
    • An Organizing Framework
  • The response of consumption to predicted income changes
    • The Excess Sensitivity Test
    • Distinguishing Between Income Increases and Income Declines
    • Episodes of Income Increases
    • Episodes of Income Declines
  • The response of consumption to unanticipated income shocks
    • The Quasi-Experimental Approach
    • Statistical Decomposition of Income Shocks
    • Subjective Expectations
  • Conclusions
  • DISCLOSURE STATEMENT
  • Acknowledgments
  • Literature Cited