Consumption and Aggregate Constraints: Evidence from U.S. States and Canadian Provinces

Charlotte Ostergaard, Bent E. Serensen and Oved Yosha
Authors registered in the RePEc Author Service: Bent E. Sorensen

Journal of Political Economy, 2002, vol. 110, issue 3, 634-645

Abstract: State-level consumption exhibits excess sensitivity to lagged income to the same extent as U.S. aggregate data, but state-specific (idiosyncratic) consumption exhibits substantially less sensitivity to lagged state-specific incomea result that also holds for Canadian provinces. We propose the following interpretation: borrowing and lending in response to changes in consumer demand are easier for individual U.S. states than for the United States as a whole, and therefore, the measured deviation from the benchmark permanent income hypothesis model is smaller. However, lagged state-specific variables help predict state-specific consumption, suggesting that the PIH model still requires qualification.

Date: 2002
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Citations: View citations in EconPapers (55)

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Working Paper: Consumption and Aggregate Constraints: Evidence from US States and Canadian Provinces (2001)
Working Paper: Consumption and aggregate constraints: evidence from U.S. states and Canadian provinces (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:v:110:y:2002:i:3:p:634-645

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