Durable Goods and the Forward-Looking Theory of Consumption: Estimates Implied by the Dynamic Effects of Money
نویسنده
چکیده
In this paper, we analyze the effects of money on the market for durable goods both empirically and theoretically. Using monthly US data on personal expenditures on durable goods and the housing market, we estimate from a VAR the dynamic responses of the price and quantity of durable goods and housing to money supply shocks, assuming only that money is neutral in the long-run. We then estimate the parameters of the basic forward-looking model of consumption, extended to include the consumption of durable goods, by fitting the predicted responses of the theory to those estimated from the VAR. We find that money has important and plausible dynamic effects on the markets for durable goods, that the basic theory provides a reasonable framework for interpreting these responses, and that the supply of durable goods and housing is highly elastic in the short-run. JEL Classifications: E40, E21, D91
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