Lead-lag relationship between household cultural expenditures and business cycles

This paper empirically examines how household cultural expenditures correspond to business cycles in Japan. Since income level is among the most important determinants of cultural demand, and income fluctuates with business cycles, examining the relationship between cultural expenditures and business cycles is useful, particularly in discussing income elasticity of cultural demand. The data used are monthly household expenditures for movies, live performances, and cultural establishments in the Family Income and Expenditure Survey. Turning points for cultural expenditures and related indicators are determined by estimating the regime-switching model. The lead-lag relationship between these series and the reference dates of Japanese business cycles are analyzed. The result indicates that cultural expenditures fluctuate cyclically with unstable leads and lags corresponding to business cycles. In addition, cultural expenditures adhere to smaller specific cycles within officially designated expansions, which imply that income elasticity has not been constant during past business cycles.