Durable Goods: An Explanation for Their Slow Adjustment
Aggregate 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.
|Date of creation:||Jun 1991|
|Publication status:||published as Journal of Political Economy, April 1993|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Ricardo J. Caballero, 1990. "Expenditure on Durable Goods: A Case for Slow Adjustment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 727-743.
- Avner Bar-Ilan & Alan S. Blinder, 1988.
"The Life Cycle Permanent-Income Model and Consumer Durables,"
Annals of Economics and Statistics,
GENES, issue 9, pages 71-91.
- Avner Bar-Ilan & Alan S. Blinder, 1987. "The Life-Cycle Permanent-Income Model and Consumer Durables," NBER Working Papers 2149, National Bureau of Economic Research, Inc.
- Guiseppe Bertola & Ricardo J. Caballero, 1994. "Irreversibility and Aggregate Investment," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 223-246.
- Bernanke, Ben, 1985.
"Adjustment costs, durables, and aggregate consumption,"
Journal of Monetary Economics,
Elsevier, vol. 15(1), pages 41-68, January.
- Ben S. Bernanke, 1982. "Adjustment Costs, Durables, and Aggregate Consumption," NBER Working Papers 1038, National Bureau of Economic Research, Inc.
- 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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