Consumption and hysteresis: the new, the old, and the challenge

Andreea-Daniela Moraru, Alina Barbulescu and Cristina Duhnea

Economic Research-Ekonomska Istraživanja, 2018, vol. 31, issue 1, 1965-1980

Abstract: Consumers are reluctant to change immediately their consumption patterns when confronted with budgetary changes, in spite of fluctuating economic conditions. Their reluctance evokes the notion of hysteresis used by economists to describe the persistent influence of past economic events. The importance of hysteresis in economic research represents a natural consequence of the development of economic sciences and of the pursuit of understanding economic systems’ evolution by taking into account their ‘memory’, their conscience of the past. The present paper represents an attempt to review some of the most relevant approaches to hysteresis in economics and to emphasise the impact of the phenomenon on macroeconomic consumption in Romania. The paper aims at reviewing the application of hysteresis to economic models, and subsequently at constructing a two-phase research on households’ individual final consumption in Romania during 1990 and 2016, employing both the unit root and the so-called ‘true’ approach to hysteresis. The research results indicated the existence of hysteresis at the macroeconomic consumption level, thus revealing several implications for economic policy, inaccessible through the standard economic models.

Date: 2018
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DOI: 10.1080/1331677X.2018.1498365

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