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Habits and Durability in Consumption, and the Effects of Tariff Protection

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  • Arman Mansoorian
  • Simon Neaime
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    Abstract

    Some recent empirical findings are used to motivate employing a model in which consumption exhibits durability, and habits develop over the flow of services provided by them, in order to study the effects of tariff protection on the current account. Durability leads to adjacent substitutability in consumption, while habits are assumed to lead to adjacent complementarity. If durability effects are dominant in the short run, and habit effects in the long run, then tariffs will lead to a current account surplus, which will be followed by a deficit. In the opposite case, a deficit will be followed by a surplus. Copyright Kluwer Academic Publishers 2000

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    File URL: http://hdl.handle.net/10.1023/A:1008333322391
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    Bibliographic Info

    Article provided by Springer in its journal Open Economies Review.

    Volume (Year): 11 (2000)
    Issue (Month): 3 (July)
    Pages: 195-204

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    Handle: RePEc:kap:openec:v:11:y:2000:i:3:p:195-204

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    Web page: http://www.springerlink.com/link.asp?id=100323

    Related research

    Keywords: habits; durability in consumption; tariffs; current account;

    References

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    1. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
    2. Ryder, Harl E, Jr & Heal, Geoffrey M, 1973. "Optimum Growth with Intertemporally Dependent Preferences," Review of Economic Studies, Wiley Blackwell, vol. 40(1), pages 1-33, January.
    3. W. M. Corden, 1987. "Protection and Liberalization: A Review of Analytical Issues," IMF Occasional Papers 54, International Monetary Fund.
    4. Razin, Assaf & Svensson, Lars E. O., 1983. "Trade taxes and the current account," Economics Letters, Elsevier, vol. 13(1), pages 55-57.
    5. Partha Sen & Stephen J. Turnovsky, 1990. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," NBER Working Papers 2781, National Bureau of Economic Research, Inc.
    6. Jonathan D. Ostry, 1990. "Tariffs and the Current Account: The Role of Initial Distortions," Canadian Journal of Economics, Canadian Economics Association, vol. 23(2), pages 348-56, May.
    7. G. Constantinides, 1990. "Habit formation: a resolution of the equity premium puzzle," Levine's Working Paper Archive 1397, David K. Levine.
    8. Engel, Charles & Kletzer, Kenneth, 1990. "Tariffs and saving in a model with new generations," Journal of International Economics, Elsevier, vol. 28(1-2), pages 71-91, February.
    9. Ostry, Jonathan D. & Rose, Andrew K., 1992. "An empirical evaluation of the macroeconomic effects of tarrifs," Journal of International Money and Finance, Elsevier, vol. 11(1), pages 63-79, February.
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    Cited by:
    1. Walter H. Fisher, 2004. "Durable Consumption As A Status Good: A Study Of Neoclassical Cases," Computing in Economics and Finance 2004 96, Society for Computational Economics.
    2. Mohsin, Mohammed, 2006. "Durability in consumption and the dynamics of the current account," Journal of Economic Dynamics and Control, Elsevier, vol. 30(1), pages 143-162, January.

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