What explains consumption in the very short-run? Evidence from checking account data

► This paper empirically investigates household consumption within a model that allows for habit formation or durability. ► The raw data consists of checking account transactions of individual households over a four month period. ► Samples of panel data are constructed for individual households with weekly, biweekly, and semi-monthly pay-periods. ► Empirical results point to “rule of thumb” consumption under liquidity constraints. ► These findings hold for households with younger heads, older heads, low-incomes, and high-incomes.