Article thumbnail
Location of Repository

Consumption Patterns over Pay Periods

By Clare Kelly and Gauthier Lanot


This paper establishes a theoretical framework to characterise the optimal behaviour of individuals who receive income periodically but make consumption decisions on a more frequent basis. The model incorporates price uncertainty and imperfect credit markets. The simulated numerical solution to this model shows that weekly consumption functions are ordered such that the functions within the payment period are highest in the first and the last week of the payment cycle for all wealth levels. Using weekly expenditure data from the FES we estimate the coefficient of relative risk aversion (point estimates are between 2 and 7) and the extent of measurement error in the data (which accounts for approximately 50\% of the variance in the data).Consumption; liquidity constraints; uncertainty; credit cards

OAI identifier:

Suggested articles


  1. (1985). A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle”,
  2. (1996). A Theory of Commodity Price Fluctuations”,
  3. (1996). Competitive Storage and Commodity Price Dynamics”,
  4. (1999). Consumption and Credit: A Model of Time-Varying Liquidity Constraints”,
  5. (1989). Consumption and Liquidity Constraints: An Empirical Investigation”,
  6. (2002). Consumption over the Life Cycle”,
  7. (1989). Cost of Business Cycles with Indivisibilities and Liquidity Constraints”,
  8. (2001). Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)”,
  9. (1996). Demand estimation with Expenditure measurement errors on the left and right hand side”,
  10. (1965). Discounted dynamic programming”,
  11. (1996). Efficiency, Risk Aversion and Portfolio Insurance: An analysis of financial asset portfolios held by investor in the United Kingdom”,
  12. (1995). Estimates of the Economic Return to Schooling for the United Kingdom”,
  13. (1995). Estimating a Non-Linear Rational Expectations Commodity Price Model with Unobservable State Variables”,
  14. (2000). Estimating Euler Equations”,
  15. (1994). Estimating the canonical disequilibrium model: asymptotic theory and finite sample properties”,
  16. (2000). Estimating the rational expectations model of speculative storage: A Monte Carlo comparison of three simulation estimators”,
  17. (1996). Household Saving: Micro Theories and Micro Facts”,
  18. (1999). Humps and Bumps in Lifetime Consumption”,
  19. (2002). Intertemporal non-separability and “rule of thumb” consumption”,
  20. (1998). Is there a Retirement Savings Puzzle?”,
  21. (2001). Measurement Error in Survey Data”
  22. (1995). Nonnegativity Constraints and Intratemporal Uncertainty in a Multi-good Life-cycle Model”,
  23. (1989). Optimal Consumption with Stochastic Income Deviations from Certainty Equivalence”,
  24. (1996). Permanent Income, Current Income and Consumption: Evidence from Two Panel Datasets”
  25. (1984). Pseudo Maximum Likelihood Methods: Theory”,
  26. (2001). Risk Pooling, Precautionary Saving and Consumption Growth”,
  27. (1991). Saving and Liquidity constraints”,
  28. (1998). Testing for liquidity constraints in Euler equations with complementary data sources”,
  29. (1987). Testing the response of consumption to income changes with (noisy) panel data”,
  30. (1991). The consumption of stockholders and nonstockholders”,
  31. (2001). The Life-Cycle Model of Consumption and Saving”,
  32. (2001). The Response of Expenditures to Anticipated Income Changes: Panel Data Estimates”,
  33. (1992). Understanding Consumption,
  34. (1993). What do we Learn About Consumer Demand Patterns from Micro Data?”,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.