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Fluctuations In Consumer Durables Expenditure And Fixed Investment of Korea

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  • Kiseok Hong

Abstract

This paper examines time series fluctuations of consumer durables expenditure and Fixed investment. Empirical Studies in the past have typically found that fluctuations in this expenditure series are inconsistent with the standard framework of utility or profit maximization. As a result, the Sources and patterns of the volatility of the series have remained largely unexplained. This paper attempts to provide an alternative description of the series, by exploiting time series implications of the stock adjustment process. A simple stock adjustment identity implies that purchases in durable goods should exhibit strong reversion over time, and that the reversion is the primary source of the volatility in durables expenditure series. Empirical results of the paper support this hypothesis. [E27]

Suggested Citation

  • Kiseok Hong, 1999. "Fluctuations In Consumer Durables Expenditure And Fixed Investment of Korea," International Economic Journal, Taylor & Francis Journals, vol. 13(3), pages 59-65.
  • Handle: RePEc:taf:intecj:v:13:y:1999:i:3:p:59-65
    DOI: 10.1080/10168739900000005
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    References listed on IDEAS

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    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. Ricardo J. Caballero, 1990. "Expenditure on Durable Goods: A Case for Slow Adjustment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 727-743.
    3. Caballero, Ricardo J, 1993. "Durable Goods: An Explanation for Their Slow Adjustment," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 351-384, April.
    4. Mankiw, N. Gregory, 1982. "Hall's consumption hypothesis and durable goods," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 417-425.
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    Cited by:

    1. Seok-Kyun Hur, 2005. "Money Growth and Interest Rates," NBER Working Papers 11102, National Bureau of Economic Research, Inc.

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