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| Tekijä: | Ejarque, J.M. |
| Otsikko: | Uncertainty, irreversibility, durable consumption and the Great Depression |
| Lehti: | Economica
2009 : JUL, VOL. 76:303, 574-587 |
| Asiasana: | consumption uncertainty history models |
| Kieli: | eng |
| Tiivistelmä: | It is questioned what was the role of uncertainty in the Great Depression. Using a calibrated general equilibrium model, this paper shows that, in response to an increase in uncertainty, agents increase expenditure on irreversible durable goods, reducing investment in irreversible physical capital. These relative movements occur due to durable goods providing a store of utility, being less irreversible than physical capital. At the beginning of the Great Depression these substitutions are unclear, yet being clearly visible at the deep end of it (in 1932), when the volatility of stock returns is consistently high. |
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