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Dynamic cost of living index for storable goods

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  • Ueda, Kozo

Abstract

Consumers hold inventory for future uses. This study investigates how such intertemporal decisions influence the cost-of-living index (COLI). To this end, I construct a simple dynamic model, in which goods are storable and nonresalable, and prices take either high (regular price) or low values (sales), and then introduce two types of dynamic COLIs. I find that neither index satisfies both monotonicity and the time reversal test.

Suggested Citation

  • Ueda, Kozo, 2020. "Dynamic cost of living index for storable goods," Economics Letters, Elsevier, vol. 189(C).
    • Handle: RePEc:eee:ecolet:v:189:y:2020:i:c:s0165176520300409
    DOI: 10.1016/j.econlet.2020.109013
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    References listed on IDEAS

    as
    1. Igal Hendel & Aviv Nevo, 2006. "Measuring the Implications of Sales and Consumer Inventory Behavior," Econometrica, Econometric Society, vol. 74(6), pages 1637-1673, November.
    2. Matthew Osborne, 2018. "Approximating the Cost-of-Living Index for a Storable Good," American Economic Journal: Microeconomics, American Economic Association, vol. 10(2), pages 286-314, May.
    3. Igal Hendel & Aviv Nevo, 2006. "Sales and consumer inventory," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 543-561, September.
    4. Igal Hendel & Aviv Nevo, 2006. "Sales and Consumer Inventory," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 543-561, Autumn.
    5. Nao Sudo & Kozo Ueda & Kota Watanabe & Tsutomu Watanabe, 2018. "Working Less and Bargain Hunting More: Macroimplications of Sales during Japan's Lost Decades," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(2-3), pages 449-478, March.
    6. Nao Sudo & Kozo Ueda & Kota Watanabe, 2014. "Micro Price Dynamics during Japan's Lost Decades," Asian Economic Policy Review, Japan Center for Economic Research, vol. 9(1), pages 44-64, January.
    7. Ueda, Kozo, 2020. "Dynamic cost of living index for storable goods," Economics Letters, Elsevier, vol. 189(C).
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    Cited by:

    1. Ueda, Kozo, 2020. "Dynamic cost of living index for storable goods," Economics Letters, Elsevier, vol. 189(C).
    2. Tsutomu Watanabe & Tomoyoshi Yabu, 2023. "The demand for money at the zero interest rate bound," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(6), pages 968-976, September.
    3. Kozo Ueda & Kota Watanabe & Tsutomu Watanabe, 2020. "Consumer Inventory and the Cost of Living Index: Theory and Some Evidence from Japan," CARF F-Series CARF-F-491, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    4. repec:upd:utmpwp:025 is not listed on IDEAS
    5. Kozo Ueda & Kota Watanabe & Tsutomu Watanabe, 2024. "Household Inventory, Temporary Sales, Price Indices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 217-251, February.
    6. repec:upd:utmpwp:033 is not listed on IDEAS

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    Keywords

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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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