Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/229000 
Year of Publication: 
2020
Series/Report no.: 
ECB Working Paper No. 2386
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
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.
Subjects: 
consumption
durable goods
SVARs
sign restrictions
JEL: 
C11
C32
D11
E21
E32
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4029-0
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.