Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases
AbstractDisturbances to aggregate expenditure on consumer durables are much more persistent than predicted by an optimizing representative consumer model. Recent work in macroeconomics has explored this "slowness to adjust" in the context of consumers facing transactions costs when purchasing durable goods. This approach produces infrequent household purchases and requires explicit attention to aggregation of households. This paper considers household behavior directly, using panel data on automobile purchases and finds that about half of the households purchase automobiles subject only to transactions costs. Explicit aggregation shows that the cross-section distribution of households according to their durables stocks is quite similar to that theoretically predicted. Simulated aggregate expenditures using observed household slowness to adjust show persistence of aggregate shocks and response to income growth consistent with the aggregate data.
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Bibliographic InfoPaper provided by Wharton School Rodney L. White Center for Financial Research in its series Rodney L. White Center for Financial Research Working Papers with number 22-91.
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Other versions of this item:
- Eberly, Janice C, 1994. "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 403-36, June.
- Eberly, J.C., 1990. "Adjustment of Consumers'durables Stocks: Evidence from Automobile Purchases," Weiss Center Working Papers 22-91, Wharton School - Weiss Center for International Financial Research.
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