What Explains Consumption and Money Holding in the Very Short Run? Evidence from Checking Account Data
Document Type
Article
Publication Date
9-2013
Department
School of Business
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.
DOI
10.1080/13504851.2013.799749
First Page
1228
Last Page
1232
Volume
20
Issue
13
ISSN
13504851
Recommended Citation
Fusaro, M. A., & Dutkowsky, D. H. (2013). What explains consumption and money holding in the very short-run?: evidence from checking account data. Applied Economics Letters, 20(13), 1228–1232. https://doi.org/10.1080/13504851.2013.799749