TY  - JOUR
AU  - Caballero,Ricardo J.
TI  - Durable Goods: An Explanation for Their Slow Adjustment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3748
PY  - 1991
Y2  - June 1991
UR  - http://www.nber.org/papers/w3748
L1  - http://www.nber.org/papers/w3748.pdf
N1  - Author contact info:
Ricardo J. Caballero
MIT
Department of Economics
Room E52-373a
Cambridge, MA 02142-1347
Tel: 617/253-0489
Fax: 617/253-6915
E-Mail: caball@mit.edu
AB  - Aggregate expenditure on durable goods responds too slowly to wealth and other aggregate innovations to be consistent with the simplest frictionless version of PIH (permanent income hypothesis). In this paper I present a model of aggregate expenditure on durab1es that builds up from the lumpy nature of microeconomic purchases, and provide evidence supporting its contribution to the resolution of the ?slowness? puzzle. The paper also contains several new results on the problem of dynamic aggregation of stochastically heterogeneous units. In particular, I provide a simple characterization of the effects of heterogeneity and microeconomic lumpiness on aggregate dynamics.
ER  -