TY - JOUR
T1 - Consumption Dynamics under Time-Varying Unemployment Risk
AU - Harmenberg, Karl
AU - Öberg, Erik
N1 - Epub ahead of print. Published online: 25. November 2020
PY - 2020/11/25
Y1 - 2020/11/25
N2 - In response to an adverse labor-market shock, a calibrated heterogeneous-agent model predicts that aggregate spending on durable goods falls mainly due to the ex-ante increase in income uncertainty caused by higher unemployment risk. In contrast, aggregate spending on nondurable goods falls mainly due to the ex-post income losses associated with realized unemployment spells. When households hold little liquid assets, the nondurable spending response is amplified, whereas the durable spending response is dampened. These differences stem from micro-level adjustment frictions involved in purchases of durable goods. The model is corroborated with evidence from micro survey data.
AB - In response to an adverse labor-market shock, a calibrated heterogeneous-agent model predicts that aggregate spending on durable goods falls mainly due to the ex-ante increase in income uncertainty caused by higher unemployment risk. In contrast, aggregate spending on nondurable goods falls mainly due to the ex-post income losses associated with realized unemployment spells. When households hold little liquid assets, the nondurable spending response is amplified, whereas the durable spending response is dampened. These differences stem from micro-level adjustment frictions involved in purchases of durable goods. The model is corroborated with evidence from micro survey data.
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U2 - 10.1016/j.jmoneco.2020.10.004
DO - 10.1016/j.jmoneco.2020.10.004
M3 - Journal article
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
SN - 0304-3932
ER -