Learn More
1 This paper estimates a structural model of optimal life-cycle consumption expenditures in the presence of realistic labor income uncertainty. We employ synthetic cohort techniques and Consumer Expenditure Survey data to construct average age-profiles of consumption and income over the working lives of typical households across different education and(More)
This paper constructs a rich model of saving for retired single people. Our framework allows for bequest motives and heterogeneity in medical expenses and life expectancies. We estimate the model using AHEAD data and the method of simulated moments. The data show that out-of-pocket medical expenses rise quickly with both age and permanent income. For many(More)
The current literature offers two views on the nature of the labor income process. According to the first view, which we call the " restricted income profiles " (RIP) model, individuals are subject to large and very persistent shocks while facing similar life-cycle income profiles (MaCurdy, 1982). According to the alternative view, which we call the "(More)
Using a representative longitudinal survey of U.S. households, we find that household income became noticeably more volatile between the early 1970s and the late 2000s despite the moderation seen in aggregate economic activity during this period. We estimate that the standard deviation of percent changes in household income rose about 30 percent between(More)
The textbook neoclassical growth model predicts that countries with faster productivity growth should invest more and attract more foreign capital. We show that the allocation of capital flows across developing countries is the opposite of this prediction: capital does not flow more to countries that invest and grow more. We call this puzzle the "(More)
  • Martha Starr-McCluer, Carol Bertaut, Chris Carroll, Dean Maki
  • 1998
This paper investigates the effects of stock market wealth on consumer spending. Traditional macroeconometric models estimate that a dollar's increase in stock market wealth boosts consumer spending by 3-7 cents per year. With the substantial 1990s rise in stock prices, the nature and magnitude of this "wealth effect" have been much debated. After(More)
and conference participants at the Federal Reserve Bank of New York, the Bank of Japan, and the Bank of England for helpful comments. The views expressed here are those of the authors and do not necessarily reflect those of the Bank of England. An earlier version of this paper was entitled 'Houses as collateral: has the link between house prices and(More)
The recent plunge in U.S. home prices left many households that had borrowed voraciously during the credit boom highly leveraged, meaning that they had very high levels of debt relative to the value of their assets. Analysts often assert that this " debt overhang " created a need for household deleveraging that, in turn, has been depressing consumer(More)
This paper investigates how oil price shocks affect the trade balance and terms of trade in a two country DSGE model. Given that oil shocks may exert very different wealth effects on oil importers and exporters, the response of the external sector depends critically on the structure of financial risk-sharing. With incomplete markets, higher oil prices can(More)
Executive Summary In this paper we consider conditions under which the estimation of a log-linearized Euler equation for consumption yields consistent estimates of preference parameters. When utility is isoelastic and a sample covering a long time period is available, consistent estimates are obtained from the log-linearized Euler equation when the(More)