Inflation Stabilisation and the Consumption of Durable Goods

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Inflation Stabilisation and the Consumption of Durable Goods

Author Info

De Gregorio, Jose
Guidotti, Pablo E
Vegh, Carlos A

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Abstract

Exchange rate-based stabilizations in chronic-inflation countries have often been characterized by an initial consumption boom (which is most evident in the behavior of durable goods) followed by a later contraction. This paper provides an explanation for such a boom-recession cycle based on the timing of purchases of durable goods. The initial fall in inflation results in a wealth effect which induces many consumers to bring forward their purchases of durable goods, thus generating an aggregate consumption boom. Since most consumers replenish their stock of durable goods at the beginning of the program, a later slowdown follows.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 108 (1998)
Issue (Month): 446 (January)
Pages: 105-31
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Handle: RePEc:ecj:econjl:v:108:y:1998:i:446:p:105-31

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Paper
- José De Gregorio & Pablo E. Guidotti & Carlos A. Végh, 1998. "Inflation Stabilization and the Consumption of Durable Goods," Documentos de Trabajo 26, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Arman Mansoorian & Mohammed Mohsin, 2008. "Durable Goods, Time Preference and The Dynamics of the Current Account," Open Economies Review, Springer, vol. 19(3), pages 337-354, July. [Downloadable!] (restricted)
John Fender & Neil Rankin, 2006. " Disinflation in an Open-Economy Staggered-Wage DGE Model: Exchange-Rate Pegging, Booms and the Role of Preannouncement," CDMA Working Paper Series 0610, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
Manoj Atolia & Edward F. Buffie, 2006. "Exchange-Rate-Based Stabilization, Durables Consumption, and Stylized Facts," Computing in Economics and Finance 2006 416, Society for Computational Economics. [Downloadable!]
Francisco Venegas Martínez, 2005. "Política fiscal, estabilización de precios y mercado incompletos," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 20(1), pages 3-25. [Downloadable!]
Sergio Rebelo & Carlos A. Vegh, 1995. "Real Effects of Exchange Rate-Based Stabilization: An Analysis of Competing Theories," NBER Working Papers 5197, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Rebelo, Sérgio, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," CEPR Discussion Papers 1220, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Rebelo, S. & Vegh, C.A., 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," RCER Working Papers 405, University of Rochester - Center for Economic Research (RCER).
- Sergio Rebelo & Carlos A. Vegh, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 125-188 National Bureau of Economic Research, Inc. [Downloadable!]
Talan Iscan, 1999. "Present Value Tests of the Current Account with Durables Consumption," Department of Economics at Dalhousie University working papers archive present, Dalhousie, Department of Economics. [Downloadable!]
Other versions:
- Iscan, T., 1999. "Present Value Tests of the Current Account with Durables Consumption," Department of Economics at Dalhousie University working papers archive 99-04, Dalhousie, Department of Economics.
- Iscan, Talan B., 2002. "Present value tests of the current account with durables consumption," Journal of International Money and Finance, Elsevier, vol. 21(3), pages 385-412, June. [Downloadable!] (restricted)
Laurence Ball, 1993. "The Dynamics of High Inflation," NBER Working Papers 4578, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Marc Hofstetter, 2004. "Disinflations in Latin America and the Caribbean: A Free Lunch?," Economics Working Paper Archive 506, The Johns Hopkins University,Department of Economics. [Downloadable!]
Other versions:
- Marc Hofstetter, 2006. "Disinflations In Latin America And The Caribbean: A Free Lunch?," DOCUMENTOS CEDE 002375, UNIVERSIDAD DE LOS ANDES-CEDE. [Downloadable!]
- Hofstetter, Marc, 2008. "Disinflations in Latin America and the Caribbean: A free lunch?," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 327-345, March. [Downloadable!] (restricted)
Fugazza, Marco & Fiess, Norbert M. & Maloney, William, 2002. "Exchange rate appreciations, labor market rigidities, and informality," Policy Research Working Paper Series 2771, The World Bank. [Downloadable!]
Other versions:
- Norbert Fiess & Marco fugazza & William Maloney, 2002. "Exchange Rate Appreciations, Labor Market Rigidities, and Informality," Working Papers 2005_15, Department of Economics, University of Glasgow. [Downloadable!]
Oya Celasun, 2003. "Sticky Inflation and the Real Effects of Exchange Rate Based Stabilization," IMF Working Papers 03/151, International Monetary Fund. [Downloadable!]
Edward F. Buffie & Manoj Atolia, 2006. "Resurrecting the Weak Credibility Hypothesis in Models of Exchange-Rate-Based Stabilization," Working Papers wp2009_01_03, Department of Economics, Florida State University, revised Aug 2007. [Downloadable!]
Edward F. Buffie & Manoj Atolia, 2005. "Exchange-Rate-Based Stabilization, Durables Consumption, and the Stylized Facts," Working Papers wp2005_12_01, Department of Economics, Florida State University, revised Jan 2009. [Downloadable!]
Marc Hofstetter, 2007. "Disinflating From Moderate Inflation," DOCUMENTOS CEDE 002373, UNIVERSIDAD DE LOS ANDES-CEDE. [Downloadable!]
John V. Leahy & Joseph Zeira, 2000. "The Timing of Purchases and Aggregate Fluctuations," NBER Working Papers 7672, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- John V. Leahy, 2005. "The Timing of Purchases and Aggregate Fluctuations," Review of Economic Studies, Blackwell Publishing, vol. 72(4), pages 1127-1151, October. [Downloadable!] (restricted)

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