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Permanent Income, Liquidity, and Expenditure on Automobiles: Evidence from Panel Data

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  • Bernanke, Ben S

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.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 99 (1984)
Issue (Month): 3 (August)
Pages: 587-614

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Handle: RePEc:tpr:qjecon:v:99:y:1984:i:3:p:587-614

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Web page: http://mitpress.mit.edu/journals/

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References

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  1. Juster, F Thomas & Wachtel, Paul, 1972. "Anticipatory and Objective Models of Durable Goods Demand," American Economic Review, American Economic Association, vol. 62(4), pages 564-79, September.
  2. Lester D. Taylor, 1971. "Saving out of Different Types of Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 2(2), pages 383-416.
  3. Thomas J. Sargent, 1977. "Rational expectations, econometric exogeneity and consumption," Staff Report 25, Federal Reserve Bank of Minneapolis.
  4. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
  5. Ferber, Robert, 1973. "Consumer Economics, A Survey," Journal of Economic Literature, American Economic Association, vol. 11(4), pages 1303-42, December.
  6. Alan S. Blinder, 1981. "Temporary Income Taxes and Consumer Spending," NBER Working Papers 0283, National Bureau of Economic Research, Inc.
  7. Wykoff, Frank C, 1970. "Capital Depreciation in the Postwar Period: Automobiles," The Review of Economics and Statistics, MIT Press, vol. 52(2), pages 168-72, May.
  8. Williams, Ross A, 1972. "Demand for Consumer Durables: Stock Adjustment Models and Alternative Specifications of Stock Depletion," Review of Economic Studies, Wiley Blackwell, vol. 39(3), pages 281-95, July.
  9. Diewert, W E, 1974. "Intertemporal Consumer Theory and the Demand for Durables," Econometrica, Econometric Society, vol. 42(3), pages 497-516, May.
  10. Mishkin, Frederic S, 1976. "Illiquidity, Consumer Durable Expenditure, and Monetary Policy," American Economic Review, American Economic Association, vol. 66(4), pages 642-54, September.
  11. Bernanke, Ben S, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, MIT Press, vol. 98(1), pages 85-106, February.
  12. Cukierman, Alex, 1980. "The Effects of Uncertainty on Investment under Risk Neutrality with Endogenous Information," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 462-75, June.
  13. Saul H. Hymans, 1970. "Consumer Durable Spending: Explanation and Prediction," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(2), pages 173-206.
  14. James Tobin, 1956. "Estimation of Relationships for Limited Dependent Variables," Cowles Foundation Discussion Papers 3R, Cowles Foundation for Research in Economics, Yale University.
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