Durable goods and the forward-looking theory of consumption: Estimates [An article from: Journal of Economic Dynamics and Control]

This digital document is a journal article from Journal of Economic Dynamics and Control, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
In this paper, we analyze the effects of money on the market for durable goods. Using quarterly US data, we estimate 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 match these responses to those predicted by an equilibrium model of the markets for durable goods; the model relies on the standard theory of intertemporal consumer choice and the trade off between durable and non-durable goods. We find that money has important dynamic effects on the markets for durable goods, and that the theory provides a reasonable framework for interpreting these responses for plausible parameter values.