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

Pok-Sang Lam

The Quarterly Journal of Economics, 1991, vol. 106, issue 1, 203-230

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.

Date: 1991
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