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Cyclicality and Durability: Evidence from U.S. Consumers' Expediture

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  • Steven Cook

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    (Coventry Business School)

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    Abstract

    In this paper three hypotheses concerning the cyclicality of U.S. consumers' expenditure are proposed. These hypotheses are based upon the distinction between expenditure on durable and non-durable goods. It is argued that durability will lead to increased cyclical sensitivity and that this increased cyclicality will be of an asymmetric nature. The asymmetric adjustment will be of the form of decreases in expenditure on durable goods being more extensive and more rapid during recessionary phases of the business cycle than corresponding increases during expansionary periods. These hypotheses are evaluated using U.S. data on consumer durables and non-durables over the period 1959-1998. Via the use of the Hodrick-Prescott (1997) filter the cyclical elements of these series are derived and subjected to Sichel's (1993) univariate tests of business cycle asymmetry. Overwhelming support is found for all of the hypotheses proposed.

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    File URL: http://www.cema.edu.ar/publicaciones/download/volume2/cook.pdf
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    Bibliographic Info

    Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

    Volume (Year): II (1999)
    Issue (Month): (November)
    Pages: 299-310

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    Handle: RePEc:cem:jaecon:v:2:y:1999:n:2:p:299-310

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    Related research

    Keywords: Asymmetry; Consumers´ Expenditure;

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    1. Donald W.K. Andrews & Christopher J. Monahan, 1990. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Cowles Foundation Discussion Papers 942, Cowles Foundation for Research in Economics, Yale University.
    2. Sichel, Daniel E, 1993. "Business Cycle Asymmetry: A Deeper Look," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 224-36, April.
    3. Caballero, R.J., 1990. "Durable Goods: An Explanation For Their Slow Adjustment," Discussion Papers 1990_49, Columbia University, Department of Economics.
    4. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
    5. Christodoulakis, Nicos & Dimelis, Sophia P & Kollintzas, Tryphon, 1995. "Comparisons of Business Cycles in the EC: Idiosyncracies and Regularities," Economica, London School of Economics and Political Science, vol. 62(245), pages 1-27, February.
    6. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. Newey, Whitney K & West, Kenneth D, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 631-53, October.
    8. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
    9. Mullineux, Andy & Peng, WenSheng, 1993. " Nonlinear Business Cycle Modelling," Journal of Economic Surveys, Wiley Blackwell, vol. 7(1), pages 41-83.
    10. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
    11. Mills, Terence C, 1991. " Nonlinear Time Series Models in Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 5(3), pages 215-42.
    12. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
    13. Darby, Michael R, 1972. "The Allocation of Transitory Income Among Consumers' Assets," American Economic Review, American Economic Association, vol. 62(5), pages 928-41, December.
    14. Gale, Douglas, 1996. "Delay and Cycles," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 169-98, April.
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