Aggregate Consumption Behaviour with Time-Nonseparable Preferences and Liquidity Constraints
Applied Financial Economics, 1997, 7, 107-114
Posted: 31 Mar 2013
Date Written: 1997
This paper estimates and tests several versions of the consumption-based asset pricing model extended to allow for time-nonseparable preferences and/or liquidity constraint proxies, using Canadian aggregate data. It is found that a habit-persistence effect uncovered in the time-nonseparable preference model is due to the model's misspecification and that liquidity constraints have significant effects on an individual's intertemporal consumption behaviour.
Keywords: Asset Pricing, Consumption, Liquidity Constraint, Durability, Habit Persistence, Generalized Method of Moments
JEL Classification: C13, C22, C32, C52, D91, G12, E21
Suggested Citation: Suggested Citation