Liquidity constraint, uncertainty and household consumption in China
AbstractThis paper investigates the changing roles played by liquidity constraint and uncertainty in accounting for the dynamism of Chinese household consumption behaviour. Starting from the Euler equation-based model of Robert Hall, a framework encompassing an array of consumption models is developed and applied to Chinese data over the period 1961-1998. Empirical results reveal a regime shift in the early 1980s and imply that increases in the proportion of liquidity constrained consumers and increased uncertainty in the post-reform period are responsible for the extremely low consumption or high savings in China. Moreover, it is found that interactions between liquidity constraint and uncertainty reinforce each other's effects and lead to declines in both the level and growth of consumption.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 36 (2004)
Issue (Month): 19 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Feltenstein, Andrew & Lebow, David & van Wijnbergen, Sweder, 1990. "Savings, Commodity Market Rationing, and the Real Rate of Interest in China," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(2), pages 234-52, May.
- John Y. Campbell & N. Gregory Mankiw, 1989.
"Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence,"
NBER Working Papers
2924, National Bureau of Economic Research, Inc.
- John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246 National Bureau of Economic Research, Inc.
- Newey, Whitney K & West, Kenneth D, 1987.
"A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix,"
Econometric Society, vol. 55(3), pages 703-08, May.
- Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Yih-Luan Chyi & Chao-Hsi Huang, 1997. "An empirical study of the 'rule of thumb' consumption model in five East Asian countries," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1271-1282.
- Qi, Li & Prime, Penelope B., 2009. "Market reforms and consumption puzzles in China," China Economic Review, Elsevier, vol. 20(3), pages 388-401, September.
- Guangjian Xu & Liyuan Dai & Jipeng Zhong, 2010. "Why Has China’s Final Consumption Rate Declined Since 1978? Causes and Implications," Journal of Family and Economic Issues, Springer, vol. 31(3), pages 338-352, September.
- Gu, Xinhua & Tam, Pui Sun, 2013. "The saving–growth–inequality triangle in China," Economic Modelling, Elsevier, vol. 33(C), pages 850-857.
- Jin, Ling & Chen, Kevin Z. & Yu, Bingxin & Huang, Zuhui, 2011. "How prudent are rural households in developing transition economies:," IFPRI discussion papers 1127, International Food Policy Research Institute (IFPRI).
- Zhou, Jingkui, 2013. "Uncertainty, inequality and consumption preferences in urban China," Economic Modelling, Elsevier, vol. 31(C), pages 308-322.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.