Aggregate dividends and consumption smoothing
journal contributionposted on 18.09.2015 by Winifred (Shih-Yun) Huang-Meier, Mark Freeman
Any type of content formally published in an academic journal, usually following a peer-review process.
We show that net equity payouts from the corporate sector play a crucial role in helping individuals manage their consumption path across the business cycle. In particular, we show that, as investors’ desire to smooth consumption increases, optimal aggregate dividends become both more volatile and more counter-cyclical to help counterbalance pro-cyclical labor income. These findings are robust to whether or not agency conflicts exist in the economy.
- Business and Economics