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This ‘reduced Ricardianism’ of the economy would also tend to increase the effectiveness of fiscal policy.
We use ‘stagnation’ to refer to a flat trend.
In contrast Muellbauer and Murata use annual national account data from 1963 to 2006.
Under complete asset markets, the transfer of resources does not take the form of borrowing/lending – instead consumption smoothing relies on state-contingent payouts.
Although, as stated previously, the real value of nominal assets is subject to interest rate and inflation surprises.
See Muellbauer and Murata (2009) for more discussion about aggregation and the stability of coefficients on income and wealth.
However, a quick comparison of the over 65 share in the survey data and the United Nations population data does not reveal a large discrepancy. The survey measure increased from 16 percent in 2000 to 27 percent in 2015. The figures for the United Nations data were 17 percent and 26 percent
The household-level microdata is in principle available upon application at the discretion of public officials but is subject to geographic restrictions.
Unfortunately, the available aggregated time series do not contain a breakdown of retired households’ or all multi-person households’ income by region.
The ‘pensioner’ category includes also households that are unoccupied for reasons other than retirement. However, the aggregate is dominated by ‘true’ pensioners which can be checked by using the shorter data sample available (from 2007) for actual pensioners. These two series basically overlap.
Even the little regional variation that we detect is mostly driven by the two smallest regions (Okinawa and Hokkaido) with less reliable data due to their limited sample sizes.
Sum of deposits and cash holdings minus total debt (incl. mortgages).
Sum of securities, individually purchased annuity policies and foreign-currency denominated assets.
Panel Dynamic OLS.
We always subtract property income (rents, interest, dividends) from the aggregate disposable income because we focus on labor income. Including interest and dividends would also imply double counting because the inclusion of asset stocks is meant to capture their importance.
The monetary variables are again measured in real per capita terms by deflating them with the non-durable and services CPI.
Disposable income growth naturally also contains information about future income, which influences the additional predictive power of the expectations measure.
The nominal interest rate is measured as the rate on the 1-year Japanese government bond. The fourth model (HHExp) replaces Consensus Economics as the source of inflation expectations by the Consumer Confidence Survey which elicits household expectations, although this data is only available since 2004
It would be wrong to conclude, though, that monetary policy would not impact consumption via various economic mechanisms. For instance, disposable income growth can be influenced by traditional and unconventional monetary policy measures.
A caveat should again be made about the low degree of variability in real interest rates. Still, we do not find the same result as Muellbauer and Murata (2009) in this regard.
Naturally, the link between assets and the responsiveness of consumption to income changes depends on the nature of income shocks experienced during the period.
The land price index is at an annual level, so we interpolate quarterly values using a polynomial smoother.
We use a crude approximation that the house price increases to the power of 3 as the size of the house grows.
Our measure of relative prices is twice differentiated to ensure stationarity.