Working Paper: NBER ID: w0838
Authors: Robert J. Shiller
Abstract: A broad exploratory data analysis is conducted to assess the promise of a kind of model in which long-term asset prices change through time primarily due to consumption related changes in the rate of discount. Aggregate consumption data are used to infer ex-post marginal rates of substitution. Prices of stocks, bonds, short debt, land and housing are examined for the period 1890 to 1980, Methods are explored of evaluating this kind of model in the absence of accurate data on consumption.
Keywords: Consumption; Asset Prices; Macroeconomic Fluctuations
JEL Codes: E21; E44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Declines in consumption (D12) | Higher discount rates (E43) |
| Higher discount rates (E43) | Lower asset prices (G19) |
| Changing expectations regarding consumption (E21) | Stock price volatility (G17) |
| Inaccurate aggregate consumption data (E21) | Misinterpretations of relationship between stock prices and consumption (E21) |
| External factors influencing consumption (D12) | Stock price fluctuations (G19) |