This paper develops and tests a new set of stochastic implications of optimal consumption behavior in the presence of borrowing constraints. In a departure from previous models, the theory shows that liquidity constraints imply a distinctive intertemporal relationship between durable and...

I find quantitative evidence of a significant effect for credit constraints on durable consumption during a post-deregulation consumer spending spree. The effect varied markedly across age and educational groups. Young households with low levels of education displayed high sensitivity to credit...

This paper develops and tests a new set of stochastic implications of optimal consumption behavior in the presence of borrowing constraints. In a departure from previous models, the theory shows that liquidity constraints imply a distinctive intertemporal relationship between durable and...