Aggregate Shocks, Idiosyncratic Risk, and Durable Goods Purchases: Evidence from Turkey's 1994 Financial Crisis

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 14.12.2004, 12:15 - 13:30


Presentation by 

Burcu Duygan (European University Institute)


Durable goods spending is the most cyclically volatile component of household consumption, yet the micro-level dynamics of this variable remain largely unknown. This paper investigates the relationship between durables purchases and employment uncertainty using a unique household data set collected throughout Turkey's 1994 financial crisis. Results show that higher unemployment risk households are less likely to buy durables, even after controlling for differences in income and tastes. For households that do buy, the paper also analyzes risk versus purchase magnitude. The amount is positively correlated with uncertainty only for small durables and is otherwise statistically insignificant.

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