Durable Goods: An Explanation for Their Slow Adjustment
AbstractAggregate expenditure on durable goods responds too slowly to wealth and other aggregate innovations to be consistent with the simplest frictionless version of PIH (permanent income hypothesis). In this paper I present a model of aggregate expenditure on durab1es that builds up from the lumpy nature of microeconomic purchases, and provide evidence supporting its contribution to the resolution of the ?slowness? puzzle. The paper also contains several new results on the problem of dynamic aggregation of stochastically heterogeneous units. In particular, I provide a simple characterization of the effects of heterogeneity and microeconomic lumpiness on aggregate dynamics.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3748.
Date of creation: Jun 1991
Date of revision:
Publication status: published as Journal of Political Economy, April 1993
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Other versions of this item:
- Caballero, Ricardo J, 1993. "Durable Goods: An Explanation for Their Slow Adjustment," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 351-84, April.
- Caballero, R.J., 1990. "Durable Goods: An Explanation For Their Slow Adjustment," Discussion Papers 1990_49, Columbia University, Department of Economics.
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- Avner BAR-ILAN & Alan S. BLINDER, 1988.
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- Caballero, R.J., 1989. "Expenditure On Durable Goods: A Case For Slow Adjustment," Discussion Papers 1989_21, Columbia University, Department of Economics.
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- Giuseppe Bertola & Ricardo J. Caballero, 1991.
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- Alan S. Blinder, 1981. "Retail Inventory Behavior and Business Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(2), pages 443-520.
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