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The aggregate consumption puzzle in Singapore

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  • Abeysinghe, Tilak
  • Choy, Keen Meng

Abstract

We draw attention to an apparent puzzle in the aggregate consumption behaviour of Singaporeans. In stark contrast to the rest of the world, the average propensity to consume has plummeted to a record low of two-fifths of income in 2000 leaving the economy without a good built-in stabilizer. This phenomenon is a notable departure from the stable long-run equilibrium relationship between consumption, disposable income and wealth observed elsewhere. The explanation of this puzzle is the main focus of the paper but we also draw attention to some policy measures that may reverse the process

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 15 (2004)
Issue (Month): 3 (June)
Pages: 563-578

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Handle: RePEc:eee:asieco:v:15:y:2004:i:3:p:563-578

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References

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  1. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
  2. Dolado, Juan José & Banerjee, Anindya & Mestre, Ricardo, . "Error-correction Mechanism Tests for Cointegration in a Single-equation Framework," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/3275, Universidad Carlos III de Madrid.
  3. Phang, Sock-Yong, 2004. "House prices and aggregate consumption: do they move together? Evidence from Singapore," Journal of Housing Economics, Elsevier, vol. 13(2), pages 101-119, June.
  4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  6. Ermisch, J. F. & Huff, W. G., 1999. "Hypergrowth in an East Asian NIC: Public policy and capital accumulation in Singapore," World Development, Elsevier, vol. 27(1), pages 21-38, January.
  7. Alexander Ludwig & Torsten Sløk, 2002. "The Impact of Changes in Stock Prices and House Prices on Consumption in OECD Countries," IMF Working Papers 02/1, International Monetary Fund.
  8. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
  9. Alan S. Blinder & Angus Deaton, 1985. "The Time Series Consumption Function Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 465-521.
  10. Gulasekaran Rajaguru & Tilak Abeysinghe, 2004. "Quarterly real GDP estimates for China and ASEAN4 with a forecast evaluation," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(6), pages 431-447.
  11. Deaton, Angus S, 1977. "Involuntary Saving through Unanticipated Inflation," American Economic Review, American Economic Association, vol. 67(5), pages 899-910, December.
  12. Simon Kuznets & Lillian Epstein & Elizabeth Jenks, 1946. "National Product Since 1869," NBER Books, National Bureau of Economic Research, Inc, number kuzn46-1, April.
  13. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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Cited by:
  1. Sadiye Baykara & Erdinç Telatar, 2012. "The Stationarity Of Consumption-Income Ratios With Nonlinear And Asymmetric Unit Root Tests: Evidence From Fourteen Transition Economies," Hacettepe University Department of Economics Working Papers 20129, Hacettepe University, Department of Economics.
  2. Cheolbeom Park & Pei Fang Lim, 2004. "Excess sensitivity of consumption, liquidity constraints, and mandatory saving," Applied Economics Letters, Taylor and Francis Journals, vol. 11(12), pages 771-774.

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