Inflation Stabilization and the Consumption of Durable Goods
AbstractExchange 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 wich induces many consumers to bring forward their 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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Bibliographic InfoPaper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 26.
Date of creation: 1998
Date of revision:
Other versions of this item:
- De Gregorio, Jose & Guidotti, Pablo E & Vegh, Carlos A, 1998. "Inflation Stabilisation and the Consumption of Durable Goods," Economic Journal, Royal Economic Society, vol. 108(446), pages 105-31, January.
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