Discussion Paper Details

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Title: Asymmetric Consumption Effects of Transitory Income Shocks

Author(s): Dimitris Christelis, Dimitris Georgarakos, Tullio Jappelli, Luigi Pistaferri and Maarten Van Rooij

Publication Date: May 2017

Keyword(s): Marginal Propensity, Positive and Negative Income Shocks and Transitory Income Shocks

Programme Area(s): Macroeconomics and Growth and Monetary Economics and Fluctuations

Abstract: We use the responses of a representative sample of Dutch households to survey questions that ask how much they would consume of an unexpected, transitory, and positive income change, and by how much they would reduce their consumption in response to an unexpected, transitory, and negative income change. The questionnaire distinguishes between relatively small income changes (a one-month increase or drop in income), and relatively larger ones (equal to three months of income). The results are broadly in line with models of intertemporal choice with precautionary saving, borrowing constraints, and finite horizons.

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Bibliographic Reference

Christelis, D, Georgarakos, D, Jappelli, T, Pistaferri, L and Van Rooij, M. 2017. 'Asymmetric Consumption Effects of Transitory Income Shocks'. London, Centre for Economic Policy Research.