Liquidity Constraints and Intertemporal Consumer Optimization : Theory and Evidence From Durable Goods
Eun Young Chah, Valerie A. Ramey, Ross M. Starr
This paper develops and tests a new set of stochastic implications of optimal consumption behavior in the presence of borrowing constraints. In a departure from previous models, the theory shows that liquidity constraints imply a distinctive intertemporal relationship between durable and nondurable good~ consumption. The presence of binding, liquidity constraints are manifested as part of an error correction term from the long-run cointegrating relationship between durables and nondurables. When liquidity constraints are binding, the error correction term will have predictive power for the future change in nondurable consumption. Empirical tests of the implications using aggregate data support the hypothesis that liquidity constraints, rather than rule-of-thumb behavior, best explain the excess sensitivity of consumption to predictable changes in income
Year of publication: |
November 1991
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Authors: | Chah, Eun Young |
Other Persons: | Starr, Ross M. (contributor) ; Ramey, Valerie A. (contributor) |
Institutions: | National Bureau of Economic Research (contributor) |
Publisher: |
Cambridge, Mass : National Bureau of Economic Research |
Subject: | Konsumtheorie | Consumption theory | Konsumentenverhalten | Consumer behaviour | Konsumgüter | Consumer goods | Liquidität | Liquidity |
Saved in:
freely available
Extent: | 1 Online-Ressource |
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Series: | NBER working paper series ; no. w3907 |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Mode of access: World Wide Web System requirements: Adobe [Acrobat] Reader required for PDF files Hardcopy version available to institutional subscribers. |
Other identifiers: | 10.3386/w3907 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012475080