n the past few weeks, the economic research of Chunlin Liu has been used by Federal Reserve Chairman Ben Bernanke in testimony before Congress.
Liu, an assistant professor of finance at the University of Nevada, Reno, has been quoted by the Wall Street Journal. The Chicago Tribune. The Los Angeles Times. The San Francisco Chronicle.
The reason for the flurry of attention? Liu and a couple of co-authors just finished a comprehensive study of the ways that consumers react when they receive a tax rebate.
And attempts to predict whether consumers will save or spend the federal tax rebate they'll receive this year is a big question for economists and business planners.
An analysis conducted by Liu along with Nicholas S. Souleles of the Wharton School at the University of Pennsylvania and Sumit Agarwal of the Federal Reserve Bank of Chicago suggests that the response of consumers is likely to be complicated.
Analyzing the credit card transactions of about 80,000 households that received checks from the federal income tax rebate of 2001, the researchers found that many consumers initially saved the rebate often by paying down their credit-card balances.
But after about three months, consumers' spending increased, and after six months they were spending more than before they received the rebate.
Mostly likely to increase their spending were the group that Liu's team called "liquidity constrained" a nice way of saying people who don't have much cash.
The study will be published in the next few weeks in The Journal of Political Economy.
Liu finds all the attention mildly amusing and a bit exciting.
"We did the study just for fun," he says. "It's a very interesting question. We were just trying to get more understanding."
A financial economist for Bank of America and FleetBoston Financial before he joined the UNR faculty in 2004, Chun's previous research has looked at subjects ranging from the ways that consumers choose credit card contracts to the effectiveness of the momentum strategy among investors in the Japanese Stock Exchange.
The flurry of attention surrounding the new study, Liu says with a laugh, is a clear demonstration of the quality of the research. Or maybe, he acknowledges, it's just a matter of being in the right place at the right time.
