Working Paper: NBER ID: w28066
Authors: Alisdair McKay; Johannes F. Wieland
Abstract: Durable goods attenuate the power of forward guidance. The extensive and intensive margins of durable goods demand are both more sensitive to the contemporaneous user cost than to future user costs. Changes in the contemporaneous real interest rate directly affect the contemporaneous user cost and durable demand, whereas promises of low future real interest rates have weaker effects through equilibrium price changes. Quantitatively, reducing the real interest rate one year from now increases output by only forty percent as much as reducing the real interest rate today. Our results are little affected by the maturity of financial assets that finance durable purchases.
Keywords: No keywords provided
JEL Codes: E21; E22; E43; E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| contemporaneous real interest rates (E43) | durable goods demand (L68) |
| future user costs (J17) | durable goods demand (L68) |
| equilibrium response of durable prices (D59) | durable goods demand (L68) |