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Private consumption behaviour, liquidity constraints and financial deregulation in France: a nonlinear analysis


  • Eric Girardin

    (Université de la Mediterranée Aix-Marseille II Ceders, Faculté des Sciences Economiques et de Gestion 14, Avenue Jules Ferry, F-13621 Aix-en-Provence Cedex, FRANCE)

  • Lucio Sarno

    () (University College, University of Oxford, Oxford OX1 4BH, United Kingdom)

  • Mark P. Taylor

    () (Warwick Business School, University of Warwick, Coventry CV4 7AL, UK)


This paper examines the effect of financial deregulation on consumption expenditure in France during the period 1970-1993. A nonlinear model for consumption which allows for liquidity constraints through a time-varying parameter dependent on a proxy for financial deregulation is estimated using nonlinear instrumental variables. It is concluded that in France financial deregulation has significantly reduced liquidity constraints faced by consumers, allowing a higher percentage of the population to smooth consumption over time. Evidence is also provided that the intertemporal elasticity of substitution is not significantly different from zero at conventional nominal levels of significance.

Suggested Citation

  • Eric Girardin & Lucio Sarno & Mark P. Taylor, 2000. "Private consumption behaviour, liquidity constraints and financial deregulation in France: a nonlinear analysis," Empirical Economics, Springer, vol. 25(2), pages 351-368.
  • Handle: RePEc:spr:empeco:v:25:y:2000:i:2:p:351-368 Note: received: January 1997/final version received: May 1999

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    References listed on IDEAS

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    Cited by:

    1. Elena Marquez de la Cruz & Ana Martinez-Canete & Ines Perez-Soba Aguilar, 2007. "Intertemporal preference parameters for some European monetary union countries," Applied Economics, Taylor & Francis Journals, vol. 39(8), pages 997-1011.
    2. Manoel Bittencourt & Chance Mwabutwa & Nicola Viegi, 2012. "Financial Reforms and Consumption Behaviour in Malawi," Working Papers 201210, University of Pretoria, Department of Economics.
    3. Luciano Fanti & Luca Gori, 2013. "Fertility-related pensions and cyclical instability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1209-1232, July.
    4. Gerdie Everaert & Lorenzo Pozzi & Ruben Schoonackers, 2016. "On The Stability Of The Excess Sensitivity Of Aggregate Consumption Growth In The Us," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 16/917, Ghent University, Faculty of Economics and Business Administration.
    5. POZZI Lorenzo & HEYLEN Freddy & DOSSCHE Maarten, "undated". "Government Debt and the Excess Sensitivity of Private Consumption to Current Income: An Empirical Analysis for OECD Countries," EcoMod2003 330700125, EcoMod.
    6. Magda Kandil & Ida Mirzaie, 2006. "Consumption and macroeconomic policies: Theory and evidence from developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(4), pages 469-491.

    More about this item


    consumption; credit; liquidity constraints; Euler equation; financial liberalization; nonlinearity;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth


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