Shocking durable goods investments


I am trying to shock (negatively) the investments of durable goods in my model. I wondered whether this shock should be appearing in the budget constraint of households or in the law of motion of durable goods :

  1. The shock in the budget constraint would be attached to the total expenses in durable goods investments. But this shock would be really a shock on the price of durable goods rather than the overall acquisition of durable goods, which I do not want. I want the shock to be a “preference” shock, as if households would reduce their needs of durable goods thanks to sufficiency behaviors. So the shock is on volumes rather than on prices.

  2. If I put the shock on the durable goods investments variable in the law of motion of durable goods, it will modify in reality the way of unit of investment transforms in durable goods stock, which is a bit odd too.

Thank you for your help.

Best regards,

It’s not clear to me which shock you have in mind. It sounds like you are looking for a preference shock. The alternatives you describe sound similar to an investment-specific technology and a marginal efficiency of investment shock.