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Permanent Income, Consumption, and Aggregate Constraints: Evidence from US States

Author

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  • Ostergaard, C.
  • Sorensen, B.E.
  • Yosha, O.

Abstract

We remove the aggregate US-wide component in US state level disposable income and consumption and find that state-specific consumption exhibits substantially less excess sensitivity to lagged state-specific disposable income than if the aggregate component is not controlled for. This is evidence that excess sensitivity of consumption in aggreagte US data is driven to a large extent by US-wide effects since, in the aggregate, US net imports and investment do not adjust quickly to fluctuations in consumption demand.

Suggested Citation

  • Ostergaard, C. & Sorensen, B.E. & Yosha, O., 1998. "Permanent Income, Consumption, and Aggregate Constraints: Evidence from US States," Papers 02-98, Tel Aviv.
    • Handle: RePEc:fth:teavfo:02-98
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    More about this item

    Keywords

    INCOME ; CONSUMPTION ; SAVINGS ; LOANS ; REGIONAL ANALYSIS;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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