What explains consumption and money holding in the very short-run? evidence from checking account data

Marc Anthony Fusaro, Donald H. Dutkowsky

Research output: Contribution to journalArticle

Abstract

This article investigates consumption and money-holding behaviour within an intertemporal optimization model of the individual household. Our data set consists of deposits and withdrawals from individual household checking accounts that received pay cheques by direct deposit. We construct samples of panel data for households with weekly, biweekly and semi-monthly pay periods and form two different measures of consumption. Generalized Method of Moments estimates of structural parameters provide limited evidence for habit formation or durability. The results indicate small but positive marginal utility of money within a well-behaved utility function, with 'rule of thumb' consumption a close approximation. These findings are uniform for sub-samples split according to household age or income.

Original languageEnglish (US)
Pages (from-to)1228-1232
Number of pages5
JournalApplied Economics Letters
Volume20
Issue number13
DOIs
StatePublished - Sep 1 2013

Keywords

  • 'rule of thumb' consumption
  • checking account data
  • durability
  • habit formation
  • household consumption
  • money in the utility function

ASJC Scopus subject areas

  • Economics and Econometrics

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