(In)Stability of the Relationship between Relative Expenditure and Price of Durable and Nondurable Goods

Vipul Bhatt and N Kishor

Journal of Money, Credit and Banking, 2026, vol. 58, issue 1, 237-259

Abstract: Using an intertemporal consumption model with nondurable and durable goods, we identify a break in the long‐run equilibrium relationship between their relative expenditure and relative prices. From 1959 to 1981, these goods were gross substitutes with an elasticity greater than one. Post‐1981, the estimated elasticity is below one, indicating complementarity. This shift altered short‐run dynamics with durable goods still driving error correction but the magnitude of adjustment is smaller. The cyclical component of durable goods consumption has become more persistent, suggesting that shocks, such as the COVID‐19 pandemic, now result in more prolonged deviations from the long‐run equilibrium.

Date: 2026
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/jmcb.13210

Related works:
Working Paper: (In)Stability of the relationship between relative expenditure and prices of durable and non-durable goods (2023)
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:wly:jmoncb:v:58:y:2026:i:1:p:237-259

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().