We use a new panel dataset of credit card accounts to analyze how consumer responded to the 2001 Federal income tax rebates. We estimate the monthly response of credit card payments, spending, and debt, exploiting the unique, randomized timing of the rebate disbursement. We find that, on...

The budget constraint requires that, eventually, consumption must adjust fully to any permanent shock to income. Intuition suggests that, knowing this, optimizing agents will fully adjust their spending immediately upon experiencing a permanent shock. However, this paper shows that if consumers...

We use the Italian Survey of Household Income and Wealth, a rather unique dataset with a long time dimension of panel information on consumption, income and wealth, to structurally estimate a buffer-stock saving model. We exploit the information contained in the joint dynamics of income,...

In 1960, Working noted that time aggregation of a random walk induces serial correlation in the first difference that is not present in the original series. This important contribution has been overlooked in a recent literature analyzing income and consumption in panel data. I examine Blundell,...

Consumption growth is predictable, a basic violation of the permanent-income hypothesis. This paper examines three possible explanations: rule-of-thumb behavior, in which households allow consumption to track per-period income flows rather than permanent income; habit persistence; and...

We show theoretically that income redistribution benefits borrowingconstrained individuals more than is implied by standard relative-income and uninsurable-risk considerations. Empirically, we find in international opinion-survey data that younger and lower-income individuals express stronger...

We argue that the US personal saving rate's long stability (1960s-1980s), subsequent steady decline (1980s-2007), and recent substantial rise (2008-2011) can be interpreted using a parsimonious buffer stock model of consumption in the presence of labor income uncertainty and credit constraints....

The downturn in economic activity in the U.S. that began in December 2007 (as determined by researchers with the National Bureau of Economic Research) has been noticeably deeper and has already lasted considerably longer than the prior two recessions - those beginning in July 1990 and in March...

We study the trend in household income uncertainty using a novel approach that measures income uncertainty as the variance of forecast errors at each future horizon separately without imposing parametric restrictions on the underlying income shocks. We find that household income uncertainty has...

We use repeated cross-sections of the Survey of Consumer Finances (SCF) to study the effect of self-reported transitory income shocks on household food spending. The self-reported shocks in the SCF are derived from survey questions about the gap between actual and "normal" income. This approach...