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Financial Openness, Aggregate Consumption and Threshold Effects

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  • Marwân-al-Qays Bousmah
  • Daria Onori

Abstract

We analyse the influence of financial openness on the level of aggregate consumption, a research question that has been left surprisingly unexplored by the previous literature. We construct a complete and balanced panel data set of 88 countries for the period 1980–2010, and then differentiate between four groups of countries. Models for non-stationary heterogeneous panels, as well as panel threshold regression models, are used to estimate the determinants of aggregate consumption. The core finding of the paper is that the financial openness effect on consumption changes in the course of economic development, with the level or per capita income acting as a threshold which is consistently estimated within the model. The openness effect is non-homogeneous across groups, stronger for low levels of per capita income and diminishes as income rises. These findings provide new insights into the welfare effect of financial liberalization.
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  • Marwân-al-Qays Bousmah & Daria Onori, 2016. "Financial Openness, Aggregate Consumption and Threshold Effects," Pacific Economic Review, Wiley Blackwell, vol. 21(3), pages 358-380, August.
    • Handle: RePEc:bla:pacecr:v:21:y:2016:i:3:p:358-380
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    File URL: http://hdl.handle.net/10.1111/1468-0106.12178
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    2. Jiangbo Yu & Ying Xu & Kai Bai, 2022. "Can Digital Finance Narrow the Household Consumption Gap of Residents on Either Side of the Hu Line?," Sustainability, MDPI, vol. 14(15), pages 1-17, August.

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