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The Consumer Response to the Mexican Peso Crisis

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  • McKenzie, David J

Abstract

Household expenditure surveys are used to examine the effects of the Mexican peso crisis on household consumption. The main smoothing mechanism was a change in the composition of consumption, with households reducing semidurable spending to maintain basic food levels. This article provides a method for disentangling income, price, demographic, and crisis adjustment effects and finds that households increased their expenditure share on certain basic food items even more than Engel's law and relative price changes would predict. I hypothesize that this reflects the use of semidurables as an adjustment mechanism and show that this leads to changes in the shape and position of the Engel curves. However, the article cannot fully rule out the alternative explanation that the reduction in semidurables reflects households reducing semidurable stocks due to a perceived fall in permanent income from the crisis.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 55 (2006)
Issue (Month): 1 (October)
Pages: 139-72

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Handle: RePEc:ucp:ecdecc:y:2006:v:55:i:1:p:139-72

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Web page: http://www.journals.uchicago.edu/EDCC/

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Cited by:
  1. Anna D'Souza & Dean Jolliffe, 2012. "Rising Food Prices and Coping Strategies: Household-level Evidence from Afghanistan," The Journal of Development Studies, Taylor and Francis Journals, vol. 48(2), pages 282-299, August.
  2. TAMURA Sakuya & SAWADA Yasuyuki, 2009. "Consumption Insurance against Unforeseen Epidemics:The Case of Avian Influenza in Vietnam," Discussion papers 09023, Research Institute of Economy, Trade and Industry (RIETI).
  3. Ferreira, Francisco H. G. & Schady, Norbert, 2008. "Aggregate economic shocks, child schooling and child health," Policy Research Working Paper Series 4701, The World Bank.
  4. D'Souza, Anna & Jolliffe, Dean, 2010. "Food Security in Afghanistan: Household-level Evidence from the 2007-08 Food Price Crisis," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61139, Agricultural and Applied Economics Association.
  5. Gibson, John & McKenzie, David & Stillman, Steven, 2011. "What happens to diet and child health when migration splits households? Evidence from a migration lottery program," Food Policy, Elsevier, vol. 36(1), pages 7-15, February.
  6. Gulsah ATAGAN & Suleyman YUKCU, 2013. "Effect of Packing Cost on The Sales Price and Contribution Margin," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 13(1), pages 1-9.
  7. Irineu E. Carvalho Filho & Marcos Chamon, 2008. "The Myth of Post-Reform Income Stagnation: Evidence from Brazil and Mexico," IMF Working Papers 08/197, International Monetary Fund.
  8. David McKenzie & Ernesto Schargrodsky, 2005. "Buying Less, But Shopping More: Changes In Consumption Patterns During A Crisis," Business School Working Papers buyinglessshop, Universidad Torcuato Di Tella.
  9. John Gibson & Steven Stillman & Trinh Le, 2004. "CPI Bias and Real Living Standards in Russia During the Transition," Working Papers in Economics 04/02, University of Waikato, Department of Economics.
  10. Nazli ALIMEN & Gul BAYRAKTAROGLU, 2011. "Consumption Adjustments of Turkish Consumers during the Global Financial Crisis," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 11(2), pages 193-203.
  11. Pushan Dutt & V. Padmanabhan, 2011. "Crisis and Consumption Smoothing," Marketing Science, INFORMS, vol. 30(3), pages 491-512, 05-06.

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