Understanding consumption in Open Economies: Argentina 1927-2003
In a country prone to currency crises and great changes in relative prices, the prevailing paradigm cannot fully explain consumption behavior. To tackle this problem this paper analyzes consumption in a two goods open economy framework. The fundamentals of private consumption are: domestic product,...
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| Formato: | Objeto de conferencia |
| Lenguaje: | Inglés |
| Publicado: |
2005
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| Acceso en línea: | http://sedici.unlp.edu.ar/handle/10915/168831 |
| Aporte de: |
| Sumario: | In a country prone to currency crises and great changes in relative prices, the prevailing paradigm cannot fully explain consumption behavior. To tackle this problem this paper analyzes consumption in a two goods open economy framework. The fundamentals of private consumption are: domestic product, net foreign assets income, tradable and nontradable productivities, and terms of trade. These five fundamentals are used to study the log-run consumption function in Argentina, applying different estimators of cointegrating vectors. We find that Argentina’s consumption volatility may be explained by external and domestic shocks transmitted through foreign sector related elasticities. The new framework developed in the paper, allows to explain the puzzle of excess volatility of consumption relative to that of output (GDP), present in some countries, particularly in Argentina. |
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