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Finance and consumption volatility: Evidence from India

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  • Ang, James B.

Abstract

The main objective of this paper is to explore the determinants of private consumption growth volatility in India, focusing on the role of financial sector policies. Using data for India over the period 1950-2005, the results show that the implementation of financial repressionist policies is strongly associated with lower consumption volatility. The results remain robust after controlling for a wide range of macroeconomic shocks and variables. The presence of a threshold effect implies that the benefits of financial reforms in reducing consumption volatility can only be reaped when the financial system becomes sufficiently liberalized. The results also indicate that the presence of a more open financial system may serve to dampen fluctuations in private consumption.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 30 (2011)
Issue (Month): 6 (October)
Pages: 947-964

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Handle: RePEc:eee:jimfin:v:30:y:2011:i:6:p:947-964

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Consumption growth volatility Financial liberalization India;

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Cited by:
  1. Lin, Pei-Chien & Huang, Ho-Chuan (River), 2012. "Banking industry volatility and growth," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 1007-1019.
  2. Rudrani Bhattacharya & Ila Patnaik, 2013. "Credit Constraints, Productivity Shocks and Consumption Volatility in Emerging Economies," IMF Working Papers 13/120, International Monetary Fund.
  3. Bhattacharya, Rudrani & Patnaik, Ila, 2013. "Credit constraints, productivity shocks and consumption volatility in emerging economies," Working Papers 13/121, National Institute of Public Finance and Policy.
  4. Okada, Keisuke, 2013. "The interaction effects of financial openness and institutions on international capital flows," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 131-143.
  5. Chance Mwabutwa & Manoel Bittencourt & Nicola Viegi, 2012. "Financial Reforms and Consumption Behaviour in Malawi," Working Papers 306, Economic Research Southern Africa.

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