Reinvestigating the U.S. Consumption Function: A Nonlinear Autoregressive Distributed Lags Approach
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Gulf University for Science and Technology; University of ChesterPublication Date
2023-11-08
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This article examines the asymmetric aspect of U.S. consumption using disaggregated quarterly consumption expenditure data, including durables, nondurables, and services from 1994 to 2019. We apply a novel nonlinear autoregressive distributed lag analysis considering a regime-switching mechanism and find that U.S. consumers behave differently during economic upturns and downturns, with asymmetry existing for the consumption of durables (in the long run) and services (in both the short and long-run), but not for nondurables. Since services account for more than 40% of U.S. aggregate output, the slow adjustment toward equilibrium and the elasticity less than unity proves that services are more of a necessity than a luxury for U.S. consumers. The results indicate that the consumption of services is the primary determinant of U.S. consumer behavior, and monetary policy has a limited effect on U.S. consumption.Citation
Ebadi, E., & Are, W. (2023). Reinvestigating the U.S. Consumption Function: A nonlinear autoregressive distributed lags approach. Economics, 17(1), article-number 20220045. https://doi.org/10.1515/econ-2022-0045Publisher
De GruyterAdditional Links
https://doi.org/10.1515/econ-2022-0045Type
ArticleDescription
© 2023 the author(s), published by De GruyterISSN
1864-6042ae974a485f413a2113503eed53cd6c53
10.1515/econ-2022-0045
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Except where otherwise noted, this item's license is described as Licence for VoR version of this article: http://creativecommons.org/licenses/by/4.0