The impact of World War Two and rationing on U.K. expenditure in the short and long run

World War Two, rationing, and shortages limited the amount of food and other goods available to households. The new welfare state of Clement Attlee's Labour Party and derationing were supposed to provide food and other consumption goods to meet the needs of households, but voters were dissatisfied. Churchill's Conservative Party, with a campaign promising to end rationing quickly, regained power. It is unclear how rationing affected households' expenditure adjustments in the short and long run. Our results show that income and own-price elasticities varied considerably in both the short and long run before, during and after the war. Varying elasticities provide insight into how households adjusted their expenditures over time. Food is typically an essential consumption item, but estimates show it was almost a luxury good during the war and in the postwar period. There is evidence that households were unable to make typical long-run desired expenditure adjustments during the war and for some time after it. Binding food rationing significantly affected spending on other goods and services. Rationing had a severe impact on household expenditures. The campaign to end rationing was pivotal in the Conservatives Party's landslide victory

Money demand in a flexible dynamic Fourier expenditure system

Demand for money

A NOTE ON THE POLICY IMPLICATIONS OF USING DIVISIA CONSUMPTION AND MONETARY AGGREGATES

Using U.K. data that are consistent with utility maximizing behavior by consumers, we construct aggregates for both consumption goods (nondurables and services) and monetary assets that are consistent with economic aggregation theory. Using these aggregates and the stock of durable goods, we estimate the elasticities of substitution between various consumption goods and monetary assets. These estimates are compared to the corresponding results from conventional monetary and consumption aggregates. The results give important information for monetary policy and the monetary transmission mechanism. In particular, these substitution estimates provide insight into the recent changes in expenditure on durable goods. We also show that the use of conventional U.K. consumption and monetary aggregates often give incorrect estimates of substitution and can provide misleading policy insights.

Substitution between monetary assets and consumer goods: New evidence on the monetary transmission mechanism

This paper presents important new evidence on the monetary transmission mechanism in the context of the degree of substitution across UK monetary assets and consumption goods. Specifically, our empirical results show that durable goods expenditures are a relatively powerful element of the monetary transmission mechanism with semi-durables consumption having a somewhat smaller impact. Our results also provide an explanation for the "puzzle" that the nominal expenditure share of durables has remained relatively stable in recent years while the real expenditure share has increased dramatically. In addition, this paper demonstrates that the potential bias in substitution estimates from using artificial break-adjusted monetary data can be reduced by using the relatively new non-break adjusted monetary data produced by the Bank of England.Monetary transmission mechanism Morishima elasticities Fourier demand system