Reinvestigating the U.S. Consumption Function: A Nonlinear Autoregressive Distributed Lags Approach

Ebadi Esmaeil () and Are Wasiu ()
Additional contact information
Ebadi Esmaeil: Department of Economics and Finance, Gulf University for Science and Technology, Mubarak Al-Abdullah, Kuwait
Are Wasiu: University of Chester, Chester, United Kingdom

Economics - The Open-Access, Open-Assessment Journal, 2023, vol. 17, issue 1, 22

Abstract: This article examines the asymmetric aspect of U.S. consumption using disaggregated quarterly consumption expenditure data, including durables, nondurables, and services from 1994 to 2019. We apply a novel nonlinear autoregressive distributed lag analysis considering a regime-switching mechanism and find that U.S. consumers behave differently during economic upturns and downturns, with asymmetry existing for the consumption of durables (in the long run) and services (in both the short and long-run), but not for nondurables. Since services account for more than 40% of U.S. aggregate output, the slow adjustment toward equilibrium and the elasticity less than unity proves that services are more of a necessity than a luxury for U.S. consumers. The results indicate that the consumption of services is the primary determinant of U.S. consumer behavior, and monetary policy has a limited effect on U.S. consumption.

Keywords: U.S. consumption; durables; services; nondurables; cointegration; asymmetry; nonlinear ARDL (search for similar items in EconPapers)
JEL-codes: C12 C22 E21 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/econ-2022-0045 (text/html)

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:bpj:econoa:v:17:y:2023:i:1:p:22:n:1

DOI: 10.1515/econ-2022-0045

Access Statistics for this article

Economics - The Open-Access, Open-Assessment Journal is currently edited by Katharine Rockett

More articles in Economics - The Open-Access, Open-Assessment Journal from De Gruyter
Bibliographic data for series maintained by Peter Golla ().