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- Type of Document: Ph.D. Dissertation
- Language: Farsi
- Document No: 52628 (44)
- University: Sharif University of Technology
- Department: management and economics
- Advisor(s): Nili, Masoud
- Abstract:
- This dissertation studies the intertemporal decisions on private consumption and its relationship with financial markets. The main focus here is on using micro-data and heterogeneities. The first chapter gives a brief review on the literature. In the second chapter, we present estimates of the Elasticity of Intertemporal Substitution (EIS) for Iranian households using synthetic cohort panels based on household micro-data. Results show significant difference with the common values used in Dynamic Stochastic General Equilibrium (DSGE) models which are originally based on estimated values for developed countries. We show that this difference has important theoretical and practical implications. In a simple Real Business Cycle (RBC) setting using the estimated values rather than the common values will help explain 33% more of consumption volatility. We also study the role of EIS in the consumption response to a monetary shock in a Smets & Wouters (2003) model as a benchmark for New-Keynesian monetary models. Results indicate that the monetary policy shock has less impact on consumption in a country with a lower elasticity of intertemporal substitution. The second chapter focuses on another important issue. In contrast to the findings of simple rational expectations permanent income hypothesis models, empirical studies show that income changes can help predict consumption change. This is dubbed as excess sensitivity in the macroeconomic literature. We use Iranian household data to investigate the excess sensitivity using civil servant status as a proxy for borrowing constraints. We observe that the excess sensitivity is different among different panels. Much less excess sensitivity is observed for government employees who have better access to finance due to the structure of the labor market and banking system in Iran. Our proxy variable to divide data, which is the working status of the head of the household, does not suffer from endogeneity problems evident in the previous literature. The results of this study indicate that the actual consumption profile of a constrained household is suboptimal and hence deepening financial access can decrease the welfare loss of this suboptimality. The last chapter studies the relationship between excess sensitivity and borrowing constraints in the country-level using a panel macro dataset
- Keywords:
- Euler Equation ; Financial Access ; Excess Sensitivity ; Intertemporal Substitution Elasticity ; Private Consumption
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