Time Use and Consumption Expenditures

Daniela Hauser, Stefano Gnocchi and Laure Simon

Staff Working Papers from Bank of Canada

Abstract: This paper documents large heterogeneity in the cyclicality of expenditure items within aggregate consumption and shows that a substantial part of this heterogeneity can be explained by differences in the household time required to consume. Combining data from the American Time Use Survey and Personal Consumption Expenditures, we construct a set of consumption activities and establish new stylized facts. We show that in a recession consumption expenditures fall to a greater extent for those activities to which households reallocate a larger share of foregone market hours, suggesting that time and expenditures are substitutes. We develop a two-sector New Keynesian model that rationalizes these patterns. Disciplining the model with microeconomic estimates of the elasticity of substitution between time and expenditures and of price stickiness, we find that our model accounts for roughly forty percent of the impact expenditure response to monetary policy shocks.

Keywords: Models and tools; Economic models; Monetary policy; Inflation dynamics and pressures; Monetary policy framework and transmission (search for similar items in EconPapers)
JEL-codes: D D1 D12 E E2 E21 E3 E32 E5 E52 J J2 J22 (search for similar items in EconPapers)
Pages: 83 pages
Date: 2026-08
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:26-29

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