Macro Seminar

Alexandre Dmitriev

University of Tasmania

11-Jun-2015

Seminar 3 – 12:00

Abstract

Our model reconciles with the data by closing the gap between cross-country correlations of consumption and output (quantity anomaly). The model predicts positive international correlations in investment and employment of the magnitude observed in the data (international comovement puzzle). The key ingredient is the preference ordering that implies internal habit formation over the composite of consumption and leisure. These lifestyle habits (i) reduce wealth effect on labor supply, which helps explain comovement of employment and output; (ii) reduce Edgeworth substitutability between consumption and leisure, which helps explain comovement of consumption; and (iii) discourage changes in consumption growth, which helps explain comovement of investment.

Download pdf
Leave Comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

clear formSubmit

This site uses Akismet to reduce spam. Learn how your comment data is processed.