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Consumption in Developing Countries: Tests for Liquidity Constraintsand Finite Horizons

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Haque, Nadeem U
Montiel, Peter

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Abstract

Adjustment programs in developing countries emphasize the importance of reducing fiscal deficits in order to improve aggregate saving and investment performance. Recent theoretical analyses associated with the Ricardian equivalence proposition, however, suggest that changes in the level of public-sector saving may be offset by a change in private saving. The empirical relevance of this proposition depends, among other things, on the length of consumers' horizons and on the extent to which households are liquidity-constrained. Empirical tests of a consumption model for a sample of developing economies do not support the equivalence propositions owing to the prevalence of liquidity constraints. Copyright 1989 by MIT Press.

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Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 71 (1989)
Issue (Month): 3 (August)
Pages: 408-15
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Handle: RePEc:tpr:restat:v:71:y:1989:i:3:p:408-15

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  1. Oriana Bandiera & Gerard Caprio Jr. & Patrick Honohan & Fabio Schiantarelli, 1998. "Does Financial Reform Raise or Reduce Savings?," Boston College Working Papers in Economics 413, Boston College Department of Economics. [Downloadable!]
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  2. Reinhart, Carmen, 1991. "A model of adjustment and growth: An empirical analysis," MPRA Paper 13233, University Library of Munich, Germany. [Downloadable!]
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  3. Chowdhury, Abdur R., 2001. "The Impact of Financial Reform on Private Savings in Bangladesh," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  4. Griet Malengier & Lorenzo Pozzi, 2005. "Examining Ricardian Equivalence by estimating and bootstrapping a nonlinear dynamic panel model," Money Macro and Finance (MMF) Research Group Conference 2005 61, Money Macro and Finance Research Group. [Downloadable!]
  5. Ahmed M. Khalid, 1994. "Empirical Tests of the Rational Expectations — Permanent Income Hypothesis: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 33(4), pages 1043-1053. [Downloadable!]
  6. Hannes Kaadu & Lenno Uusküla, 2004. "Liquidity Constrains and Ricardian Equivalence in Estonia," Bank of Estonia Working Papers 2004-7, Bank of Estonia, revised 10 Oct 2004. [Downloadable!]
  7. Rodolfo Cermeño & Bernardo D. Roth & F. Alejandro Villagómez, 2008. "Fiscal Policy and National Saving in Mexico, 1980-2006," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 23(2), pages 281-312. [Downloadable!]
  8. Reinhart, Carmen, 1991. "Fiscal Policy, the Real Exchange Rate, and Commodity Prices," MPRA Paper 8197, University Library of Munich, Germany. [Downloadable!]
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  9. John Baffoe-Bonnie & Mohammed Khayum, 1997. "Economic Development, Life-Cycle Consumption, And Planning Horizon," International Economic Journal, Korean International Economic Association, vol. 11(4), pages 17-37, December. [Downloadable!] (restricted)
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  10. Joyce Manchester & Warwick Mckibbin, 1995. "The global macroeconomics of NAFTA," Open Economies Review, Springer, vol. 6(3), pages 203-223, July. [Downloadable!] (restricted)
  11. Patrick A. Imam, 2008. "Rapid Current Account Adjustments: Are Microstates Different?," IMF Working Papers 08/233, International Monetary Fund. [Downloadable!]
  12. Reinhart, Carmen, 1990. "Fiscal policy, the real exchange rate and commodity prices: A global framework," MPRA Paper 14102, University Library of Munich, Germany. [Downloadable!]
  13. Boileau Loko & Philippe Beaugrand & Montfort Mlachila, 2002. "The Choice Between External and Domestic Debt in Financing Budget Deficits: The Case of Central and West African Countries," IMF Working Papers 02/79, International Monetary Fund. [Downloadable!]
  14. Foued Chihi & Michel Normandin, 2008. "External and Budget Deficits in Developing Countries," Cahiers de recherche 0819, CIRPEE. [Downloadable!]
  15. Lopez, Ramon & Islam, Asif, 2008. "When Government Spending Serves the Elites: Consequences for Economic Growth in a Context of Market Imperfections," Working Papers 45875, University of Maryland, Department of Agricultural and Resource Economics. [Downloadable!]
  16. William T. Smith, 1998. "Birth, Death, And Consumption: Overlapping Generations And The Random Walk Hypothesis," International Economic Journal, Korean International Economic Association, vol. 12(4), pages 105-116, December. [Downloadable!] (restricted)
  17. Faini, Riccardo, 1991. "The macroeconomics of the public sector deficit : the case of Morocco," Policy Research Working Paper Series 631, The World Bank. [Downloadable!]
  18. Faini, Riccardo & de Melo, Jaime, 1991. "Fiscal issues in adjustment : an introduction," Policy Research Working Paper Series 724, The World Bank. [Downloadable!]
  19. G. Malengier & L. Pozzi, 2004. "Examining Ricardian Equivalence by estimating and bootstrapping a nonlinear dynamic panel model," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/274, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  20. Gerhard Reitschuler & Jesús Crespo Cuaresma, 2004. "Ricardian Equivalence Revisited: Evidence from OECD countries," Economics Bulletin, Economics Bulletin, vol. 5(16), pages 1-10. [Downloadable!]
  21. Bandiera, Oriana & Caprio, Gerard & Honohan, Patrick & Schiantarelli, Fabio, 1999. "Does financial reform increase or reduce savings ?," Policy Research Working Paper Series 2062, The World Bank. [Downloadable!]
  22. Reinhart, Carmen & Ostry, Jonathan, 1991. "Private Saving and Terms of Trade Shocks," MPRA Paper 13716, University Library of Munich, Germany. [Downloadable!]
  23. Patrick Honohan, 1995. "The Impact of Financial and Fiscal Policies on Saving," Papers WP059, Economic and Social Research Institute (ESRI). [Downloadable!]
  24. Firdu Gmech, 2006. "The Mckinnon-Shaw Hypothesis: Thirty Years on:A Review of Recent Developments in Financial Liberalization Theory," Working Papers id:537, esocialsciences.com. [Downloadable!]
  25. Chan Il Park & Jene K. Kwon, 1996. "The Hyper-Inflation Of Land And Consumption Behavior," International Economic Journal, Korean International Economic Association, vol. 10(4), pages 47-48, December. [Downloadable!] (restricted)
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