This paper studies the long-run relationship between consumption, labour income and asset wealth in Poland. Within cointegrated VAR model dynamic responses of the variables in the system to shocks are studied. In addition, series are decomposed into permanent and transitory components on the basis of the cointegrating relation found in the system.

Main conclusion of this paper is that deviations of the three variables from their estimated long-run relationship are better explained with uctuations of labour income than assets. A tentative explanation of this nding is presented. Additionally, the magnitude of the asset wealth eect in Poland is calculated and compared with other studies for European countries and for the U.S.