Working Paper: NBER ID: w0756
Authors: Ben S. Bernanke
Abstract: Several recent papers have tested the permanent income-cum- rational expectations hypothesis using data on nondurable or semi-durable consumption. We show how this approach can be extended to the case of durables. An application to panel data on automobile expenditures reveals no evidence against the permanent income hypothesis. This result is unchanged in subsamples segregated by family holdings of liquid assets.
Keywords: Permanent Income Hypothesis; Consumer Expenditure; Durable Goods; Automobile Expenditures; Panel Data
JEL Codes: D12; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Family income (D31) | Automobile expenditures (L62) |
| Transitory income changes (H31) | Automobile expenditures (L62) |
| Liquidity constraints (E51) | Timing of automobile purchases (L62) |
| Expected long-term income (J17) | Automobile expenditures (L62) |