Holmes, M. J., & Shen, X. (2013). A note on the average propensity to consume, wealth and threshold adjustment. Economic Modelling, 35, 309-313.
Permanent Research Commons link: http://hdl.handle.net/10289/8043
We explore the connection between the average propensity to consume (APC) and wealth to income ratio (WY) in the US. We find evidence of a long-run relationship characterised by threshold error correction. It is the APC that responds to long-run disequilibrium where the speed of adjustment is asymmetric insofar as being most likely fastest in regimes characterised by a high APC and low WY.
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