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Liquidity Profiles of Poor Mexican Households

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  • Paxton, Julia
  • Young, Lauren
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    Abstract

    Summary Buffer stock savings theories predict that more vulnerable households build up liquid savings in order to cope with income variability. Using data from 1801 marginalized Mexican households, this paper examines how household liquidity levels vary by income level and use of banking. The paper finds strong evidence of buffer stock savings in poor and vulnerable households. It also shows that membership in a financial cooperative is a determinant of higher household liquidity levels. Financial instruments are used more to confront idiosyncratic shocks than systemic shocks. Idiosyncratic shocks and remittances are important determinants of liquidity levels in unbanked households.

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    Bibliographic Info

    Article provided by Elsevier in its journal World Development.

    Volume (Year): 39 (2011)
    Issue (Month): 4 (April)
    Pages: 600-610

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    Handle: RePEc:eee:wdevel:v:39:y:2011:i:4:p:600-610

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    Web page: http://www.elsevier.com/locate/worlddev

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    Keywords: Latin America Mexico liquidity household finance precautionary savings;

    References

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    1. Nava Ashaf & Dean Karlan & Wesley Yin, 2004. "Tying odysseus to the mast: Evidence from a commitment savings product in the philippines," Natural Field Experiments 00206, The Field Experiments Website.
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    6. Julia Paxton, 2009. "Subsistence Savings Strategies of Male- and Female-Headed Households: Evidence from Mexico," Eastern Economic Journal, Palgrave Macmillan, vol. 35(2), pages 209-231.
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    9. Imran Matin & David Hulme & Stuart Rutherford, 2002. "Finance for the poor: from microcredit to microfinancial services," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(2), pages 273-294.
    10. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 103-114, Summer.
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    12. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
    13. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1994. "Expanding the Life-Cycle Model: Precautionary Saving and Public Policy," American Economic Review, American Economic Association, vol. 84(2), pages 174-79, May.
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