Structural Breaks and Consumer Credit: Is Consumption Smoothing Finally a Reality? Ryan R. Brady Department of Economics US Naval Academy Example of slide presentation for 475C, Spring 2006

Overview Objectives Motivation and brief Literature Review Economic Method and Regression Analysis Results Conclusions and Implications Briefly outline for your audience how you are going to proceed.

Motivation Credit market frictions prevent consumption smoothing and make households (and economy) sensitive to shocks—use of credit cards is evidence of liquidity constraints. --Hall (1978) --Gross and Souleles (2002); Attanasio et al (2004); Liquidity constraints propagate Monetary policy (interest rate changes) and Fiscal Policy. --Bernanke and Gertler (1995) --Johnson et al (2004); Coronado et al (2005). With this slide you will briefly explain what your topic is about and what others have studied and found about your area of research. Notice that the slide is not self-contained. Use the slide as a guide with a couple of bullets, then fill in the gaps by talking in more detail about the points made on the slide.

Objectives Estimate structural breaks in time series for consumption and consumer credit in order to see if structural and regulatory change has affected the behavior of these variables. Estimate structural equation for consumption growth based on break dates. This tests the Permanent Income Hypothesis—Do Consumers Smooth Consumption? With this slide tell your audience what you do in the paper. What is main question you are asking, and what are you going to do to answer that question?

Estimation With the following Regression Equation I test the permanent income hypothesis—is consumption growth “excessively sensitive” to income growth or consumer credit growth? where, Explain your Regression and Economic Method

Results Have a least one slide with results

Conclusions I find breaks in mean of Revolving credit (credit cards) in approximately 1983 and 1998; break in volatility in Structural Estimation shows data is consistent with consumption smoothing in the 1990s and 2000s. You will inevitably discuss your conclusions as you discuss your results. However, clearly state your conclusions as a summary for your audience.

Implications Results contrast previous evidence on liquidity constraints and consumption behavior. Modern support for Hall’s (1978) claims. Support for structural interpretation of the “Great Moderation.” Results suggest that discretionary Monetary Policy and Fiscal Policy are ineffective. Finish by telling your audience why your results are interesting and important—why they matter for monetary policy.

Say “Thank You” to your audience.