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Testing liquidity constraints in 10 Asian developing countries: an error-correction model approach

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  • Muzafar Shah Habibullah
  • Peter Smith
  • W. N. W. Azman-Saini

Abstract

An error-correction model is used to estimate the fraction of consumers who are liquidity-constrained in 10 Asian developing countries. Our estimates of the fraction of consumers who are liquidity-constrained range between 0.25 and 0.98. We further investigate whether financial liberalization has resulted in the reduction of liquidity constraints in these countries. However, the results find support for this only in the cases of South Korea, Sri Lanka and Taiwan.

Suggested Citation

  • Muzafar Shah Habibullah & Peter Smith & W. N. W. Azman-Saini, 2006. "Testing liquidity constraints in 10 Asian developing countries: an error-correction model approach," Applied Economics, Taylor & Francis Journals, vol. 38(21), pages 2535-2543.
  • Handle: RePEc:taf:applec:v:38:y:2006:i:21:p:2535-2543
    DOI: 10.1080/00036840500427833
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    References listed on IDEAS

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    Cited by:

    1. Meral Karasulu, 2008. "Stress Testing Household Debt in Korea," IMF Working Papers 08/255, International Monetary Fund.
    2. Quaas, Georg, 2008. "Das Problem der Spezifikation einer Konsumfunktion im Rahmen der VGR 2005
      [The specification problem of the consumption function in the framework of the NIA-system 2005]
      ," MPRA Paper 18497, University Library of Munich, Germany, revised 09 Nov 2009.
    3. Nagayasu, Jun, 2012. "The threshold consumption correlation-based approach to international capital mobility: Evidence from advanced and developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 256-263.
    4. Giovanni Di Bartolomeo & Lorenza Rossi & Massimiliano Tancioni, 2011. "Monetary policy, rule-of-thumb consumers and external habits: a G7 comparison," Applied Economics, Taylor & Francis Journals, vol. 43(21), pages 2721-2738.

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