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Variability of Durable and Nondurable Consumption: Evidence for Six O.E.C.D. Countries

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  • Gali, Jordi

Abstract

The author estimates consumption variability ratios for both durable and nondurable consumption using data for six OECD countries. His methodology, which relies on a long-run restriction implied by the consumer's intertemporal budget constraint, overcomes many of the problems inherent to previous approaches. Some important departures from the permanent income model emerge: (1) nondurable consumption shows mild excess smoothness in the United States and Italy, and mild excess volatility in Japan and France, and (2) durable consumption shows extreme excess smoothness in all countries. Alternative factors capable of generating the differences in volatility across types of goods are discussed. Copyright 1993 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 75 (1993)
Issue (Month): 3 (August)
Pages: 418-28

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Handle: RePEc:tpr:restat:v:75:y:1993:i:3:p:418-28

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. International Monetary Fund, 2011. "Business Cycles in Emerging Markets," IMF Working Papers, International Monetary Fund 11/133, International Monetary Fund.
  2. Jian Wang & Charles Engel, 2008. "International Trade in Durable Goods: Understanding Volatility, Cyclicality, and Elasticities," 2008 Meeting Papers, Society for Economic Dynamics 210, Society for Economic Dynamics.
  3. Timo Koivumäki, 1996. "Permanent income hypothesis and variability of consumption," Finnish Economic Papers, Finnish Economic Association, Finnish Economic Association, vol. 9(2), pages 144-154, Autumn.
  4. Christopher J. Erceg & Andrew T. Levin, 2002. "Optimal Monetary Policy with Durable and Non-Durable Goods," Computing in Economics and Finance 2002, Society for Computational Economics 343, Society for Computational Economics.
  5. Álvarez-Parra, Fernando & Brandao-Marques, Luis & Toledo, Manuel, 2013. "Durable goods, financial frictions, and business cycles in emerging economies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 60(6), pages 720-736.
  6. Kwamie Dunbar, 2008. "The Impact of the FOMC's Monetary Policy Actions on the growth of Credit Risk: the Monetary Policy - Liquidity Paradox," Working papers, University of Connecticut, Department of Economics 2008-05, University of Connecticut, Department of Economics.
  7. Erik Hjalmarsson & Par Osterholm, 2007. "A residual-based cointegration test for near unit root variables," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 907, Board of Governors of the Federal Reserve System (U.S.).
  8. Charles Engel & Jian Wang, 2007. "International trade in durable goods: understanding volatility, cyclicality, and elastics," Globalization and Monetary Policy Institute Working Paper, Federal Reserve Bank of Dallas 03, Federal Reserve Bank of Dallas.

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