Consumption and macroeconomic policies: Theory and evidence from developing countries
This paper examines determinants of private consumption in a sample of developing countries. The empirical model includes income, a proxy for the cost of consumption, and the exchange rate. Anticipated movements in these determinants are likely to trigger adjustment in planned consumption, while unanticipated changes determine random transitory adjustment in consumption. Fluctuations in private consumption are mostly random with respect to unanticipated changes in income and, to a lesser extent, the exchange rate. Consumption increases during cyclical expansion of income and decreases in the face of an unanticipated increase in the cost of consumption. Exchange rate fluctuations have mixed results on private consumption. As for the effects of domestic policies, fiscal policy has a limited, and sometimes negative, effect on private consumption. Monetary growth, in contrast, stimulates an increase in private consumption. This evidence supports recent calls to decrease the size of government and enhance the role of monetary policy in stimulating private activity in developing countries.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 15 (2006)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RJTE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RJTE20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990.
"Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?,"
8905, Michigan State - Econometrics and Economic Theory.
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
- Kandil, Magda & Mirazaie, Ida, 2004.
"The Effects of Exchange Rate Fluctuations on Output and Prices: Evidence from Developing Countries,"
Journal of Developing Areas,
Tennessee State University, College of Business, vol. 38(2), pages 189-219, January-M.
- Magda E. Kandil & Ida Aghdas Mirzaie, 2003. "The Effects of Exchange Rate Fluctuationson Output and Prices; Evidence From Developing Countries," IMF Working Papers 03/200, .
- Reinhart, Carmen & Vegh, Carlos, 1995.
"Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination,"
13898, University Library of Munich, Germany.
- Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," Journal of Development Economics, Elsevier, vol. 46(2), pages 357-378, April.
- Leong, Kenneth & McAleer, Michael, 1999. "Testing the life-cycle permanent income hypothesis using intra-year data for Sweden," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 48(4), pages 551-560.
- Park, Sangkyun & Rodrigues, Anthony P, 2000. "Is Aggregate Consumer Borrowing Consistent with the Permanent Income Hypothesis?," Manchester School, University of Manchester, vol. 68(3), pages 301-320, June.
- DeJuan, Joseph P. & J. Seater, John, 1999. "The permanent income hypothesis:: Evidence from the consumer expenditure survey," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 351-376, April.
- Cashin, Paul & McDermott, C John, 1998.
"Testing the Consumption-CAPM in Developing Equity Markets,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 3(2), pages 127-141, April.
- Cashin, P. & McDermott, C. J., 1997. "Testing the Consumption-Capm in Developing Equity Markets," Department of Economics - Working Papers Series 593, The University of Melbourne.
- Kandil, Magda & Mirzaie, Ida Aghdas, 2003. "The effects of dollar appreciation on sectoral labor market adjustments: Theory and evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(1), pages 89-117.
- Paul R. Krugman & Richard E. Baldwin, 1987. "The Persistence of the U.S. Trade Deficit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 1-56.
- Hussein, Khaled A. & de Mello, Luiz Jr., 1999. "International capital mobility in developing countries: theory and evidence," Journal of International Money and Finance, Elsevier, vol. 18(3), pages 367-381.
- Sarno, Lucio & Taylor, Mark P., 1998.
"Real Interest Rates, Liquidity Constraints and Financial Deregulation: Private Consumption Behavior in the U.K,"
Journal of Macroeconomics,
Elsevier, vol. 20(2), pages 221-242, April.
- Lucio Sarno & Mark P. Taylor, "undated". "Real Interest Rates, Liquidity Constraints and Financial Deregulation: Private Consumption Behaviour in the UK," Economics and Finance Discussion Papers 97-12, Economics and Finance Section, School of Social Sciences, Brunel University.
- 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.
- Kandil, Magda & Mirzaie, Aghdas, 2002. "Exchange rate fluctuations and disaggregated economic activity in the US: theory and evidence," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 1-31, February.
- Kandil, Magda, 2001. "Asymmetry in the effects of us government spending shocks: evidence and implications," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(2), pages 137-165.
- Zhang, Yin & Wan, Guang Hua, 2002. "Household consumption and monetary policy in China," China Economic Review, Elsevier, vol. 13(1), pages 27-52.
- Engle, Robert F., 1982. "A general approach to lagrange multiplier model diagnostics," Journal of Econometrics, Elsevier, vol. 20(1), pages 83-104, October.
When requesting a correction, please mention this item's handle: RePEc:taf:jitecd:v:15:y:2006:i:4:p:469-491. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.