TY  - JOUR
AU  - Leahy,John V.
AU  - Zeira,Joseph
TI  - The Timing of Purchases and Aggregate Fluctuations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7672
PY  - 2000
Y2  - April 2000
UR  - http://www.nber.org/papers/w7672
L1  - http://www.nber.org/papers/w7672.pdf
N1  - Author contact info:
John V. Leahy
Department of Economics
New York University
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/992-9770
E-Mail: john.leahy@nyu.edu

Joseph Zeira
Department of Economics
The Hebrew University of Jerusalem
Mt. Scopus
Jerusalem 91905
ISRAEL
Tel: 972 2 5883256
Fax: 972 2 5816071
E-Mail: mszeira@mscc.huji.ac.il
AB  - This paper analyzes how the decision of when to buy a durable good affects both non-durable consumption and business cycle dynamics.  At the individual level, we show that the timing of durable goods purchases plays an important role in smoothing consumption over time.  In the benchmark case, the time at which the agent purchases the durable good is the only variable that reacts to changes in wealth, while other variables, such as the consumption of non-durables or the amount of the durable that the individual purchases, remain unchanged.  At the aggregate level, we show that timing decisions can serve as a mechanism for the amplification and propagation of aggregate shocks.  A decline in wealth causes individuals to delay their durable goods purchases which reduces demand dramatically for some time.
ER  -