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Identifying Preferences when Households are Financially Constrained

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  • Andreas Tryphonides

    (University of Cyprus)

Abstract

This paper shows that utilizing information on the extensive margin of financially constrained households can narrow down the set of admissible preferences in a large class of macroeconomic models. Estimates based on Spanish aggregate data provide further empirical support for this result and suggest that accounting for this margin can bring estimates closer to microeconometric evidence. Accounting for financial constraints and the extensive margin is shown to matter for empirical asset pricing and quantifying distortions in financial markets. (Copyright: Elsevier)

Suggested Citation

  • Andreas Tryphonides, 2023. "Identifying Preferences when Households are Financially Constrained," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 521-546, December.
    • Handle: RePEc:red:issued:21-242
    DOI: 10.1016/j.red.2023.06.001
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    More about this item

    Keywords

    Preferences; Bounds; Financial constraints; Extensive Margin; Asset Prices;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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