The persistence of macroeconomic shock effects on Russian household consumption
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Transcript of The persistence of macroeconomic shock effects on Russian household consumption
The persistence of The persistence of macroeconomic shock macroeconomic shock effects on Russian effects on Russian household consumptionhousehold consumption
Yana Yushkina
Why is this interesting?Why is this interesting?
Source: BEA
Theory: intertemporal Theory: intertemporal optimization problemoptimization problemmax Et[ ∑T
i=t βi-t u(Ci) ]
s.t. Wt+1= R(Xt-Ct )
◦ Wt is the stock of wealth at the beginning period t
◦ Xt = Wt + Yt is cash on hand (wealth + labor earnings)
◦ R = (1 +r) where r is the constant real interest rate
◦ β = 1/(1 + δ) where δ is the homogenous discount rate
Uncertainty?
Literature on consumption Literature on consumption smoothingsmoothingEmpirical estimationInstrumenting for permanent
income Response of C to predictable
changes in IResponse of C to exogenous
shocks◦Stillman (2003)
DataDataRussia Longitudinal Monitoring
Survey (RLMS) Contains information about
household- level expenditures, income, and demographic characteristics
ModelModellnExpenditureht(food, non-food, or durables) =
θ1..(n-1) (lags of lnExpenditureht(food, non-
food, or durables)) + γ1lnIncomeht + γ2…
n(lags of lnIncome) + α1 (Shock Dummy) + α2(Shock Dummy)*lnIncome + β(household characteristics)ht + εht
IssuesIssuesNo data after 2007