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The purpose of this paper is to investigate four possible asymmetries in US aggregate consumption and its major components (durables, non-durables, and services) for the period 1990-2013. Understanding the asymmetric behavior of the components is important since the impact of monetary policy on separate consumer spending categories may differ substantially.

The authors first employ stationarity and cointegration tests to specify and estimate the long-run equilibrium relationship between consumer spending and such variables as disposable income, consumer sentiment, and the expected real interest rate. The authors then specify a structural error-correction model for each spending category to simultaneously investigate such possible asymmetries due to the ratchet effect, psychological negativity bias, interest rate effect, and varying degree of adjustment in eliminating disequilibrium defined as the gap between actual and desired spending.

First, consumption and its major components all display asymmetric behavior consistent with psychological negativity bias. Second, consumer spending on durable goods also displays asymmetries consistent with both the ratchet effect and the interest rate effect. Third, non-durables respond asymmetrically to disequilibrium; consumers adjust (increase) spending on non-durables only when actual spending is below desired spending on non-durable goods. Fourth, services also respond asymmetrically to disequilibrium; consumers adjust (reduce) spending on services only when actual spending is above desired spending on services.

This study provides new insight on the asymmetric behavior of consumer spending. The authors believe that the findings should help with macroeconomic policymaking when such indicators as income, consumer sentiment, and expected real interest rates display significant variations.

This paper examines the implications of standard barter models of market equilibrium for financial security returns in New Zealand. The key question addressed is: does the ‘equity premium puzzle’ of Mehra and Prescott (1985) found in the U.S. also hold in ?ew Zealand? To examine the existence of the equity premium puzzle, quarterly financial security returns and consumption data are examined from 1965 to 1997 to calibrate parameters in the Consumption Based Asset Pricing Model. Unlike much of the existing international evidence, this paper corrects for durable goods consumption following the assumptions of the model that all consumption be consumed in a given period. Numerical analyses indicate that the class of models examined are unable to generate equity premia consistent with historical estimates of the equity premium in New Zealand. Due to small sample variability however, while this discrepancy is material in size, the result is not statistically significant.

This paper seeks to reconsider the Euler equation of the Consumption Capital Asset Pricing Model (CCAPM), to derive a regression‐based model to test it, and to present evidence that the model is consistent with reasonable values for the coefficient of relative risk aversion (CRRA). This runs contrary to the findings of the literature on the equity premium puzzle, but is in agreement with the literature that estimates the CRRA for the purpose of computing the social discount rate, and is in line with the research on labor supply. Tests based on General Method of Moments (GMM) for the same sample produce results that are extremely disparate and unstable. The paper aims to check and find support for the robustness of the regression‐based tests. Habit formation models are also to be evaluated with regression‐based and GMM tests. However, the validity of the regression‐based models depends critically on their functional forms.

The paper presents empirical evidence that the conventional use of GMM fails because of four pathological features of GMM that are referred to under the general caption of “weak identification”. In addition to GMM, the paper employs linear regression analysis to test the CCAPM, and it is found that the regression residuals follow well‐behaved distributional properties, making valid all statistical inferences, while GMM estimates are highly unstable.

Four unexpected findings are reported. The first is that the regression‐based models are consistent with reasonable values for the CRRA, i.e. estimates that are below 4. The second is that the regression‐based tests are robust, while the GMM‐based tests are not. The third is that regression‐based tests with habit formation depend crucially on the specification of the model. The fourth is that there is evidence that market stock returns are sensitive to both consumption and dividends. The author calls the latter “extra sensitivity of market stock returns”, and it is described as a new puzzle.

The regression‐based models of the CCAPM Euler equation are novel. The comparison between GMM and regression‐based models for the same sample is original. The regression‐based models with habit formation are new. The equity premium puzzle disappears because the estimates of the CRRA are reasonable. But another puzzle is documented, which is the “extra sensitivity of market stock returns” to consumption and dividends together.

The purpose of this paper is to investigate the impact of a consumer confidence shock on GDP and different types of consumer spending during a slack state as well as a non-slack state of an economy.

The authors use the US quarterly data from 1960Q1 to 2014Q4 and apply Jorda’s (2005) local projection method to compute the impulse responses of macroeconomic variables to a consumer confidence shock. The local projection method allows us to include non-linearities in the response function.

In general, the response of output, following a consumer confidence shock, is similar in slack and non-slack states and indicate that an unfavorable confidence shock is contractionary. However, the intensity and duration of impact of a confidence shock on different components of spending are state dependent. Overall, a negative confidence shock appears to have a stronger impact on non-slack time than on a slack time.

Policy makers should be careful about undertaking a policy action that may affect consumer confidence adversely, particularly during an economic good time. An adverse confidence shock can trigger a downfall in a well-functioning economy and the dampening effect may last for several quarters before the economy rebounds.

US economy is subject to fluctuations; however, the literature on the impact of confidence shock in different economic states is limited. The incremental contribution of this paper is that it investigates how the consumers respond to the confidence shock in a state-dependent model. Furthermore, the authors use a more robust and alternative estimation method that tackles any non-linear problems.

A vector autoregression model estimated on US data before and after 1980 documents systematic differences in the response of short- and long-term interest rates, corporate bond spreads and durable spending to news total factor productivity shocks. Interest rates across the maturity spectrum broadly increase in the pre-1980s and broadly decline in the post-1980s. Corporate bond spreads decline significantly, and durable spending rises significantly in the post-1980 period while the opposite short-run response is observed in the pre-1980 period. Measuring expectations of future monetary policy rates conditional on a news shock suggests that the Federal Reserve has adopted a restrictive stance before the 1980s with the goal of retaining control over inflation while adopting a neutral/accommodative stance in the post-1980 period.

This article evaluates contemporary Cuban economic policy and development prospects after a decade of market experimentation in a socialist context. An introductory historical review assesses the successes and failures of Cuban development policy in the 1970s and 1980s and describes the staggering dimensions of the economic crisis triggered by the abrupt disruption of Cuba's relations with the Soviet bloc in 1989–1991. The next section, “To the market in the 1990s,” examines Cuban efforts to stabilize the economy in the early 1990s while maintaining a strong social safety net. The historic policy shift toward limited market liberalization within a state-dominated economy is analyzed and the key market concessions described. The economic turnaround of the late 1990s and Cuban macroeconomic and industrial performance over the past decade are then examined. The final part of the article evaluates the coherence and sustainability of Cuba's emerging economic model and assesses prospects for the survival of some form of Cuban socialism.

The purpose of this paper is to test whether households with members that experience job loss shocks are able to protect their previous level of consumption. The paper also tests whether consumption protection is affected when spells persist through time.

The paper estimates an intertemporal consumption model, where households try to smooth their marginal utility over time. For that purpose it analyses Spanish household budget surveys that span a long period, 1999-2012, including the Great Recession. Unlike most consumption datasets, this microdata is designed as a panel and provides detailed information for all consumption categories as well as household members’ labour status.

The paper finds that consumption smoothing is dependent on the household member facing the unemployment transition. In particular, only main breadwinner’s unemployment transitions affects consumption smoothing. It also shows that the consumption drop persists beyond the period of the job loss for ongoing spells, although it follows a decreasing pattern. Finally, the estimation results are stable over the business cycle.

The results suggest that Spanish households are not capable of fully insuring against main breadwinner’s unemployment shocks. Further, the results show that this effect remains up to two years for ongoing unemployment spells. Thus these results highlight a welfare loss by Spanish households with unemployed members.

The paper extends the usual analysis of job loss shocks by the main breadwinner to include the cases of both the spouse and the rest of household members, who tend to account for most unemployment. Further, it tests for unemployment persistence. Finally, it checks the sensitivity of the results to the business cycle, including the Great Recession.

Throughout the 21st century, US households have experienced unprecedented levels of leverage. This dynamic has been exacerbated by income shortfalls during the COVID-19 crisis. Leveraging and deleveraging decisions affect household consumption. This study investigates the effect of the dynamics of household leverage and consumption on the stock market.

The authors explore the relation between household leverage and consumption in the context of the consumption capital asset pricing model (CCAPM). The authors test the model's implication that leverage has a negative risk premium by transforming the asset pricing restriction into an unconditional linear factor model and estimate the model using the general method of moments procedure. The authors run time-series regressions to estimate individual stocks' exposures to leverage, and cross-sectional regressions to investigate the leverage risk premium.

The authors show that shocks to household debt have strong and lasting effects on consumption growth. The authors extend the CCAPM to accommodate this effect and find, using various test assets, a negative risk premium associated with household deleveraging. Looking at individual stocks the authors show that the deleveraging risk premium is not explained by well-known risk factors.

This paper contributes to the literature on the role of leverage in economics and finance by establishing a relation between household leverage and spending decisions. The authors provide novel evidence that households' leveraging and deleveraging decisions can be a fundamental and influential force in determining asset prices. Further, this paper argues that household leverage might explain the small, persistent, and predictable component in consumption growth hypothesised in the long-run risk asset pricing literature.

Globalization has brought apparent transformations to the UAE market. Shift in market trends due to a growing multicultural population induces marketers to update their marketing strategies. Focusing on the purchase behavior and level of satisfaction of consumers coming from different regions, the purpose of this paper is to examine the influence of multi‐cultural consumers in the buying behaviour in the Abu Dhabi market for durable and non‐durable consumer products.

The sampling frame to examine the impact of heterogeneous culture in a geocentric market comprised 300 consumers belonging to different nationalities working in the UAE. Satisfaction Index, Kendall's Coefficient of Concordance and Kruskal–Wallis test were used to test hypotheses constructed from literature.

The three hypotheses formulated to test inter‐cultural differences revealed the influence of multi‐culture on consumers' buying behaviour. This paper recommends that by optimizing the utility of well‐advanced digital media in the Emirates, marketers can customize strategies by which to penetrate culturally segmented niches.

Global marketing is emerging in the Arab markets, assuming that global culture will bring about a paradigm shift from homogenous to heterogeneous buying habits. Exploring the influence of multicultural consumerism, the study illustrates the divergent demands of Abu Dhabi consumers.