This is not a paper where I have ever understood what features of the data are interacting with the model to produce the conclusions. It would be nice if I could crack this: Marjorie A. Flavin: The Joint Consumption/Asset Demand Decision: A Case Study in Robust Estimation: "The Michigan Survey of Consumer Finances... whether... consumption tracks current income more closely than is consistent with the permanent income hypothesis can be attributed solely or partially to borrowing constraints.... The paper uses a robust instrumental variables estimator, and argues that achieving robustness with respect to leverage points is actually simpler, both conceptually and computationally, in an instrumental variables context than in the OLS context.... Households do use asset stocks to smooth their consumption.... There is no evidence that the excess sensitivity of consumption to current income is caused by borrowing constraints.... Robust instrumental variables estimates are more stable across different subsamples, more consistent with the theoretical specification of the model, and indicate that some of the most striking findings in the conventional results were attributable to a single, highly unusual observation...


#noted #2019-10-11

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