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Intertemporal Substitution and Durable Goods: An Empirical Analysis

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  • Yvon Fauvel
  • Lucie Samson
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    Abstract

    The hypothesis that large fluctuations in observed quantities are induced by intertemporal substitution is frequently used in modern macroeconomics. One channel through which fluctuations in real rates of return on savings can impact on the economy is via their influence on the purchases of durable goods by consumers. This paper proposes and estimates a model of an optimizing agent who is faced with the problem of allocating intertemporally his consumption of nondurable and durable goods when confronted with a fluctuating rate of return. Expectations are assumed to be formed rationally. The authors' analysis of Canadian data is favorable to this class of models.

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    Bibliographic Info

    Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

    Volume (Year): 24 (1991)
    Issue (Month): 1 (February)
    Pages: 192-205

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    Handle: RePEc:cje:issued:v:24:y:1991:i:1:p:192-205

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    Cited by:
    1. Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," Journal of Development Economics, Elsevier, vol. 46(2), pages 357-378, April.
    2. Guillermo A. Calvo & Carlos A. Vegh, 1999. "Inflation Stabilization and BOP Crises in Developing Countries," NBER Working Papers 6925, National Bureau of Economic Research, Inc.
    3. Sen, Amit, 1999. "Approximate p-values of predictive tests for structural stability," Economics Letters, Elsevier, vol. 63(3), pages 245-253, June.
    4. Stanley Fischer & Ratna Sahay & Carlos A. Végh Gramont, 2002. "Modern Hyper- and High Inflations," IMF Working Papers 02/197, International Monetary Fund.
    5. Reinhart, Carmen & Vegh, Carlos, 1994. "Inflation stabilization in chronic inflation countries: The empirical evidence," MPRA Paper 13689, University Library of Munich, Germany.
    6. Nadenichek, Jon, 1999. "Consumer durable goods in an international real business cycle framework," The Quarterly Review of Economics and Finance, Elsevier, vol. 39(2), pages 233-247.
    7. Reinhart, Carmen & Ogaki, Masao, 1995. "Measuring intertemporal substitution: The role of durable goods," MPRA Paper 13690, University Library of Munich, Germany.
    8. Steven Silver, 2010. "Convergence in Revealed Preferences for Automobiles as Differentiated Goods: U.S. and OECD Countries: 1970–1999," Atlantic Economic Journal, International Atlantic Economic Society, vol. 38(1), pages 3-14, March.
    9. Reinhart, Carmen & Vegh, Carlos, 1994. "Intertemporal consumption substitution and inflation stabilization:An empirical investigation," MPRA Paper 13427, University Library of Munich, Germany.
    10. Lopez Murphy, Ricardo & Navajas, Fernando, 1998. "Domestic savings, public savings and expenditures on consumer durable goods in Argentina," Journal of Development Economics, Elsevier, vol. 57(1), pages 97-116, October.

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