Cyclical drivers of euro area consumption: what can we learn from durable goods?
Georgi Krustev and
André Casalis
No 2386, Working Paper Series from European Central Bank
Abstract:
We study the cyclical dynamics of consumption in the euro area (EA) and the large EA countries by distinguishing durable from nondurable expenditures. We adopt a theoretical partial equilibrium framework to justify the identification strategy of our empirical model, a time-varying parameter structural vector autoregression (TVP-SVAR). Following the main insight from the theoretical model, that liquidity constraints induce important interactions between durables and nondurables, we distinguish durable-specific demand and supply shocks, while taking into account monetary and credit conditions. Our main findings are: (i) durables react faster and more strongly than nondurables after monetary shocks in the euro area and in the largest EA countries, a confirmation of an outcome commonly reported for the US; (ii) there is a large degree of cross-country heterogeneity in how different factors (including durable-specific ones) explain consumption; (iii) the strength of spillovers from durable to nondurable consumption, as predicted by theory, is empirically correlated with how much households across countries are likely to be liquidity constrained. JEL Classification: C11, C32, D11, E21, E32
Keywords: consumption; durable goods; sign restrictions; SVARs (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-eec, nep-mac and nep-opm
Note: 2215397
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2386~434669b972.en.pdf (application/pdf)
Related works:
Journal Article: Cyclical drivers of euro area consumption: What can we learn from durable goods? (2022) 
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:ecb:ecbwps:20202386
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().