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Wealth heterogeneity and the response of consumption to shocks

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  • Jiri Slacalek

Abstract

How does the distribution of wealth affect consumers’ responses to shocks? A model calibrated to a realistic income process, with both aggregate and household-specific components, and one that matches the empirical wealth distribution suggests that poorer households react strongly to transitory income shocks, consistent with the substantial body of microeconomic evidence. JEL Classification: E2, E3

Suggested Citation

  • Jiri Slacalek, 2013. "Wealth heterogeneity and the response of consumption to shocks," Research Bulletin, European Central Bank, vol. 19, pages 10-12.
    • Handle: RePEc:ecb:ecbrbu:2013:0019:2
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    More about this item

    Keywords

    consumption; wealth;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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