This paper proposes a model to jointly explain two stylized facts observed in the recent empirical literature—the existence of a significant size of wealthy hand-to-mouth consumers and negative marginal propensities to consume associated with housing upgrades. The key ingredients of the model are a realistic set of housing choices, sizable down payment requirements, transaction costs, and endogenous borrowing constraints. Moreover, in the presence of unanticipated income shocks, this richness in marginal propensities to consume has significant implications for aggregate consumption and helps explain the puzzling increase in savings by low net worth households observed during the Great Recession as well as the consumption responses to recent tax rebates.
Recent research offers mixed results concerning the relationship between inflation expectations and consumption, using qualitative measures of readiness to spend. We revisit this question using survey panel data of actual spending from the U.S. between 2009 and 2012 that also allows us control for household heterogeneity. We find that durables spending increases with expected inflation only for selected types of households while nondurables spending does not respond to expected inflation. Moreover, spending decreases with expected unemployment. These results imply a limited stimulating effect of inflation expectations on aggregate consumption, which could be reversed if inflation and unemployment expectations move together.
We investigate whether the dynamic response of aggregate consumption to monetary policy depends on the distribution of household debt relative to income. Using UK loan-level micro-data, we propose a novel approach to isolate the fraction of households with a limited ability to smooth consumption. By exploiting time and cross-sectional variation, we show that consumption responds more to monetary policy when the share of highly-indebted households is large, but find no state-contingency with respect to the overall level of debt-to-income. Our results highlight the role of household heterogeneity for understanding monetary transmission to aggregate consumption.
The paper examined public perception of the effects of poverty on economic growth in Ghana. It specifically examined public perception on the relationship between poverty and economic growth in Ghana using a combination of descriptive statistics and Logit Model to analyse the primary data collected. The result revealed that poverty does not lower investment, per capita income was not high enough to reflect Ghana’s resources, it was also discovered that poverty programmes are effective and standard of living were inadequate. The paper further discovered that unemployment rate was not too high in Ghana. Corruption does not pose any threat to poverty and economic growth. There existed low income inequality between the rich and the poor but income was not evenly distributed while inflation does not increased the plight of the poor or deteriorates the living standard of the poor. The result further discovered that government performance was inadequate, lifespan was low, Ghana was able to meet MDGs goal by the end of 2015 but may not be able to sustain the achievement beyond 2015. Above all, poverty decisively slowed down the pace of economic growth in Ghana. The result of the Logit model showed that unemployment, corruption, secondary school enrollment, government policy, life-expectancy and poverty retarded economic growth while investment, aggregate consumption expenditure, pattern of income distribution and inflation, enhanced economic growth in Ghana. The result further revealed that only investment, aggregate consumption expenditure and inflation are the determinants of economic growth in Ghana. The paper concluded that poverty slowed down the pace of economic growth in Ghana. The paper therefore recommends that government should introduce and maintain policies that will permit improved relationships between poverty and other variables except investment, welfare and inflation so that they can positively and significantly contribute to increase economic growth in Ghana.
This paper offers a critique of the Austrian theory according to which social time preference determines the proportion between aggregate consumption and aggregate saving, and therefore also the volume of total investment expenditure. We argue that there is no such necessary relationship between the (pure) interest rate and the volume of aggregate investment. Then we discuss the implications of our thesis for growth theory and business-cycle theory, stressing in particular the need to distinguish between two types of growth and two corresponding types of inter-temporal misallocation.
Key words: Time Preference, Time Market, Investment Expenditure, Growth Types, Inter-Temporal Mis-allocation, Austrian Business-Cycle Theory, Austrian Macroeconomics.
JEL classification: B53, D01, D40, D92, E22, E32, E43.
The purpose of this paper is to offer a critique of the theory according to which social time preference determines the proportion between aggregate consumption and aggregate saving, and therefore also the volume of total investment expenditure. This theory is held by virtually all Austrian economists past and present. We will first present it based on Rothbard’s Man, Economy, and State, where it is stated in the clearest and most detailed form. Then we will examine its shortcomings and discuss some implications of our findings.