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Recurrent Anticipated Liquidity Shocks and Household Expenditure

Author

Listed:
  • Hector Cardozo

    (Arizona State University)

  • Damian Pierri

    (Universidad Autónoma de Madrid/IIEP)

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.

Suggested Citation

  • Hector Cardozo & Damian Pierri, 2024. "Recurrent Anticipated Liquidity Shocks and Household Expenditure," Working Papers 347, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:347
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    File URL: https://rednie.eco.unc.edu.ar/files/DT/347.pdf
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    References listed on IDEAS

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