Liquidity constraints and intertemporal consumer optimization: theory and evidence from durable goods.: An article from: Journal of Money, Credit & Banking

This digital document is an article from Journal of Money, Credit & Banking, published by Ohio State University Press on February 1, 1995. The length of the article is 6413 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

From the supplier: This paper develops and tests the implications of optimal consumption behavior with borrowing constraints. The theory shows that liquidity constraints imply a distinctive intertemporal relationship between durable and nondurable goods consumption. Binding liquidity constraints appear as part of an error correction term derived 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. (Printed by permission of the publisher.)

Citation Details
Title: Liquidity constraints and intertemporal consumer optimization: theory and evidence from durable goods.
Author: Eun Young Chah
Publication:Journal of Money, Credit & Banking (Refereed)
Date: February 1, 1995
Publisher: Ohio State University Press
Volume: v27 Issue: n1 Page: p272(16)

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