Consumption and Capital Market Imperfection: An International Comparison
AbstractWe estimate Euler equations for a number of countries and find that the excess sensitivity of consumption to current income fluctuations is higher in the countries where consumers borrow less. The low level of consumer debt in these countries can be interpreted either as a symptom of tighter credit rationing or as the result of a lower demand for loans. The evidence described in this paper suggests that the former interpretation may be more appropriate and thus supports the view that excess sensitivity may be attributed to liquidity constraints, rather than to other factors.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 244.
Date of creation: May 1988
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Other versions of this item:
- Jappelli, Tullio & Pagano, Marco, 1989. "Consumption and Capital Market Imperfections: An International Comparison," American Economic Review, American Economic Association, vol. 79(5), pages 1088-1105, December.
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