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| Author: | Gregorio, J. de Guidotti, P. E. Vegh, C. A. |
| Title: | Inflation stabilisation and the consumption of durable goods |
| Journal: | Economic Journal
1998 : JAN, VOL. 108:446, p. 105-131 |
| Index terms: | INFLATION STABILIZATION CONSUMPTION CONSUMER DURABLES |
| Language: | eng |
| Abstract: | Exchange rate-based stabilisations in chronic-inflation countries are often accompanied by initial consumption boom followed by a later recession. The boom-recession cycle is particularly evident i the behavior of durable goods. This study suggests an explanation based on the timing of purchase of durable goods. The initial fall in inflation generates a wealth effect which induces many consumers to bring forward purchases of durable goods, thus leading to an aggregate consumption boom. The initial bunching in purchases of durable goods sets the stage for a later slowdown, as most consumers do not need to replenish their stock for a while. |
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