Permanent Income, Import Prices, and the Demand for Imported Consumer Durbales: A Structural Econometric Investigation / Richard H. Clarida.

Format:

Book

Author/Creator:

Clarida, Richard H.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4437.

NBER working paper series no. w4437

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Permanent Income, Import Prices, and the Demand for Imported Consumer Durbales

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1993.

Summary:

This paper derives a rational expectations, permanent income model of the demand for imported consumer durable goods. Assuming that the preferences of the representative household are addilog, our model implies that the log of the exact but unobservable utility index of permanent income must in equilibrium be cointegrated with log consumption of nondurables. Using nondurables consumption as our noisy proxy for permanent income, we estimate that log nondurables consumption, the log relative price of durables imports, and log spending on durables imports are cointegrated, and that this cointegrating vector exactly identifies the model's structural parameters. We are unable to reject the essential empirical implications of the model, and obtain sensible estimates of the price and income elasticities of the demand for imported consumer durables. In particular, we find that consumer durables imports are quite price elastic in the long run, and that the permanent income elasticity of imported durable goods demand averages 2.3.

Notes:

Print version record

August 1993.