Liquidity Constraints and Aggregate Consumption Behavior

This paper presents time-series evidence on the importance of liquidity constraints in aggregate consumption expenditures. In contrast to previous studies, the author finds the proportion of consumption attributable to liquidity constrained behavior to be large and highly statistically significant. The estimation pays careful attention to the problems of stochastic consumption and temporal aggregation, and the estimates are shown to be robust to alternative specifications involving costly adjustment of consumption, public spending, and to stochastically varying rates of return.

Publication Information
Article Title: Liquidity Constraints and Aggregate Consumption Behavior
Journal: Economic Inquiry (Jan, 1992)
v. 30, iss. 1, pp. 134-153
Author(s): Cushing, Matthew J
Researcher Information
Cushing, Matthew J
Cushing, Matthew J
  • Labor Economics
  • Econometrics
  • Macroeconomics
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