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

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  • Steven Cook

    ()
    (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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    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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    Keywords: Asymmetry; Consumers´ Expenditure;

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    References

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    1. Caballero, Ricardo J, 1993. "Durable Goods: An Explanation for Their Slow Adjustment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(2), pages 351-84, April.
    2. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    3. Mills, Terence C, 1991. " Nonlinear Time Series Models in Economics," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 5(3), pages 215-42.
    4. Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
    5. Mullineux, Andy & Peng, WenSheng, 1993. " Nonlinear Business Cycle Modelling," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 7(1), pages 41-83.
    6. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0055, National Bureau of Economic Research, Inc.
    7. Daniel E. Sichel, 1989. "Business cycle asymmetry: a deeper look," Working Paper Series / Economic Activity Section, Board of Governors of the Federal Reserve System (U.S.) 93, Board of Governors of the Federal Reserve System (U.S.).
    8. Donald W.K. Andrews & Christopher J. Monahan, 1990. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 942, Cowles Foundation for Research in Economics, Yale University.
    9. Timothy Cogley & James M. Nason, 1993. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series: implications for business cycle research," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 93-01, Federal Reserve Bank of San Francisco.
    10. repec:att:wimass:9220 is not listed on IDEAS
    11. Newey, Whitney K & West, Kenneth D, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(4), pages 631-53, October.
    12. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
    13. Gale, Douglas, 1996. "Delay and Cycles," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(2), pages 169-98, April.
    14. 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, London School of Economics and Political Science, vol. 62(245), pages 1-27, February.
    15. Darby, Michael R, 1972. "The Allocation of Transitory Income Among Consumers' Assets," American Economic Review, American Economic Association, American Economic Association, vol. 62(5), pages 928-41, December.
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    Cited by:
    1. Lamey, L. & Deleersnyder, B. & Dekimpe, M.G. & Steenkamp, J-B.E.M., 2005. "The Impact of Business-Cycle Fluctuations on Private-Label Share," ERIM Report Series Research in Management, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasm ERS-2005-061-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

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