Disinflation, Real Income Uncertainty and the Demand for Consumer Durables in a Mean–Variance Model of Portfolio Selection

Jakob Madsen

Manchester School, 2001, vol. 69, issue 2, 179-196

Abstract: Survey evidence indicates that consumers only expect to be fractionally compensated by the real income reduction of inflation. Incorporating this evidence into a mean–variance model of portfolio selection, this paper shows that demand for durables is a negative function of expected inflation and income uncertainty. Using quarterly data for the USA and annual panel data for the OECD countries, empirical evidence shows that demand for durables is significantly adversely affected by inflation and income uncertainty, and that the recent disinflation has resulted in a significant increase in demand for durables.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/1467-9957.00241

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:manchs:v:69:y:2001:i:2:p:179-196

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1463-6786

Access Statistics for this article

Manchester School is currently edited by Keith Blackburn

More articles in Manchester School from University of Manchester Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().