The Timing of Purchases and Aggregate Fluctuations
This paper analyzes how the decision of when to buy a durable good affects both non-durable consumption and business cycle dynamics. At the individual level, we show that the timing of durable goods purchases plays an important role in smoothing consumption over time. In the benchmark case, the time at which the agent purchases the durable good is the only variable that reacts to changes in wealth, while other variables, such as the consumption of non-durables or the amount of the durable that the individual purchases, remain unchanged. At the aggregate level, we show that timing decisions can serve as a mechanism for the amplification and propagation of aggregate shocks. A decline in wealth causes individuals to delay their durable goods purchases which reduces demand dramatically for some time.
|Date of creation:||Apr 2000|
|Date of revision:|
|Publication status:||Published as "Sectoral Shocks, Learning, and Aggregate Fluctuations", Review of Economic Studies, Vol. 60, no. 205 (1993): 777-794.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sanford J. Grossman & Guy Laroque, 1987.
"Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods,"
NBER Working Papers
2369, National Bureau of Economic Research, Inc.
- Grossman, Sanford J & Laroque, Guy, 1990. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," Econometrica, Econometric Society, vol. 58(1), pages 25-51, January.
- Sanford J Grossman & Guy Laroque, 2003. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," Levine's Working Paper Archive 618897000000000803, David K. Levine.
- 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.
- Ricardo J. Caballero, 1991. "Durable Goods: An Explanation for Their Slow Adjustment," NBER Working Papers 3748, National Bureau of Economic Research, Inc.
- Bar-Ilan, Avner & Blinder, Alan S, 1992. "Consumer Durables: Evidence on the Optimality of Usually Doing Nothing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 258-72, May.
- De Gregorio, Jose & Guidotti, Pablo E & Vegh, Carlos A, 1998.
"Inflation Stabilisation and the Consumption of Durable Goods,"
Royal Economic Society, vol. 108(446), pages 105-31, January.
- José De Gregorio & Pablo E. Guidotti & Carlos A. Végh, 1998. "Inflation Stabilization and the Consumption of Durable Goods," Documentos de Trabajo 26, Centro de Economía Aplicada, Universidad de Chile.
- 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.
- 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.
- Janice C. Eberly, . "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Rodney L. White Center for Financial Research Working Papers 22-91, Wharton School Rodney L. White Center for Financial Research.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7672. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.