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Permanent Income, Liquidity, and Adjustments of Automobile Stocks: Evidence from Panel Data

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  • Pok-Sang Lam

Abstract

A recent article by Bernanke [1984] tests the rational expectations-permanent income hypothesis using panel data on automobile expenditures. He finds no evidence refuting the hypothesis. This paper incorporates a threshold adjustment process into Bernanke's model. Estimations based on a subset of the data used by Bernanke reveal evidence that resale market imperfections and credit market constraints have important effects on automobile expenditures.

Suggested Citation

  • Pok-Sang Lam, 1991. "Permanent Income, Liquidity, and Adjustments of Automobile Stocks: Evidence from Panel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 203-230.
  • Handle: RePEc:oup:qjecon:v:106:y:1991:i:1:p:203-230.
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    Cited by:

    1. Yulei Luo & Jun Nie & Eric R. Young, 2015. "Slow Information Diffusion And The Inertial Behavior Of Durable Consumption," Journal of the European Economic Association, European Economic Association, vol. 13(5), pages 805-840, October.
    2. Richard Blundell & Ran Gu & Soren Leth-Petersen & Hamish Low & Costas Meghir, 2019. "Durables and Lemons: Private Information and the Market for Cars," Economics Papers 2019-W10, Economics Group, Nuffield College, University of Oxford.
    3. Giuseppe Bertola & Luigi Guiso & Luigi Pistaferri, 2005. "Uncertainty and Consumer Durables Adjustment," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 973-1007.
    4. repec:ebd:wpaper:149 is not listed on IDEAS
    5. Lastrapes, William D. & Potts, Todd B., 2006. "Durable goods and the forward-looking theory of consumption: Estimates implied by the dynamic effects of money," Journal of Economic Dynamics and Control, Elsevier, vol. 30(8), pages 1409-1430, August.
    6. Jerome Adda & Russell Cooper, 2000. "Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 778-806, August.
    7. Eberly, Janice C, 1994. "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 403-436, June.
    8. Nicholas S. Souleles, "undated". "Household Securities Purchases, Transactions Costs, and Hedging Motives," Rodney L. White Center for Financial Research Working Papers 24-99, Wharton School Rodney L. White Center for Financial Research.
    9. Kessel, Dany & Tyrefors, Björn & Vestman, Roine, 2018. "The Housing Wealth Effect: Quasi-Experimental Evidence," Working Paper Series 361, Sveriges Riksbank (Central Bank of Sweden).
    10. Zhou, Jingkui, 2013. "Uncertainty, inequality and consumption preferences in urban China," Economic Modelling, Elsevier, vol. 31(C), pages 308-322.
    11. Tanisa Tawichsri, 2018. "Consumption Responses and Redistributive Implications of Luxury Durable Tax Rebates," PIER Discussion Papers 99, Puey Ungphakorn Institute for Economic Research, revised Jul 2022.
    12. Michio Suzuki, 2016. "Understanding The Costs Of Consumer Durable Adjustments," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1561-1573, July.
    13. Boyer, Robert & Freyssenet, Michel, 2002. "Entre innovations historiques et contraintes structurelles Eléments d'une théorie des modèles productifs," CEPREMAP Working Papers (Couverture Orange) 0205, CEPREMAP.
    14. Hyunseung Oh, 2019. "The Role of Durables Replacement and Second‐Hand Markets in a Business‐Cycle Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(4), pages 761-786, June.
    15. Orazio P. Attanasio, 1998. "Consumption Demand," NBER Working Papers 6466, National Bureau of Economic Research, Inc.
    16. Taglioni, Daria & Zavacka, Veronika, 2013. "Innocent bystanders: how foreign uncertainty shocks harm exporters," Working Paper Series 1530, European Central Bank.
    17. Jerome Adda & Russell Cooper, 2000. "The Dynamics of Car Sales: A Discrete Choice Approach," NBER Working Papers 7785, National Bureau of Economic Research, Inc.
    18. Koeniger, Winfried, 2002. "The Dynamics of Market Insurance, Insurable Assets, and Wealth Accumulation," IZA Discussion Papers 615, Institute of Labor Economics (IZA).
    19. John V. Duca & Bonnie Garrett, 1992. "The effects of credit availability, nonbank competition, and tax reform on bank consumer lending," Working Papers 9207, Federal Reserve Bank of Dallas.
    20. Taglioni, Daria & Zavacka, Veronika, 2012. "Innocent bystanders : how foreign uncertainty shocks harm exporters," Policy Research Working Paper Series 6226, The World Bank.

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