Unveiling Income as a Measure of Liquidity

Abstract

The concept of liquidity is intricate and subjective. It is widely studied in economic and financial realms. Researchers, aiming to comprehend and quantify liquidity, have utilized a variety of proxies in their examination of household liquidity, with household income being the primary indicator. This paper challenges the reliability of Household Income as a proxy for liquidity. Utilizing demographic and shopping behavior data, it estimates household liquidity and validates predictions by assessing the Economic Stimulus Payments influence on spending. The results suggest that integrating shopping behavior with demographic data provides a more nuanced and precise picture of household liquidity.

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Meenakshi Balakrishna
Meenakshi Balakrishna
PhD candidate in Quantitative Marketing

Meenakshi Balakrishna is a doctoral candidate in Quantitative Marketing at University of California San Diego.