Recurrent Anticipated Liquidity Shocks and Household Expenditure

Hector Cardozo and Damian Pierri
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Hector Cardozo: Arizona State University

No 347, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: We exploit a novel panel of thousands of monthly bank accounts to examine the responses of households in Argentina to a predictable and periodic liquidity shock, the regular biannual bonus (RBB). We find that household spending is highly responsive to the RBB, increasing by 3.4% relative to its annual average, mainly through expenditures on durable goods. Likewise, households use the RBB to cancel debt. We develop a model that successfully replicates expenditure patterns and underscores the risks associated with durable goods. Our study highlights the critical role of these goods in shaping spending responses to anticipated and recurrent liquidity shocks.

Keywords: anticipated liquidity shocks; durable goods; expenditure (search for similar items in EconPapers)
Pages: 42 pages
Date: 2024-12
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:347

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