IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Understanding Consumption in Colombia

  • Alejandro López

    ()

  • Martha Misas

    ()

  • Hugo Oliveros

    ()

One of the principal issues of Colombian macroeconomic policy in the 1990s has been the deterioration of private savings (Figure 1). The decline in the private saving rate was usually related to consumers real expenditure, which grew by an average of 3.9% in the period 1991-1993, compared to 1.9% per annum during 1950-1990. The trade reform, the acceleration of the financial liberalization process, a reassessment of permanent income due to the oil bonanza and a sterilization policy that increased real interest rates, and caused expectations of real exchange rate appreciation, were seen as the main determinants of the high consumption growth experienced in this decade (see, among others, Urrutia an López (1994-1995), Echeverry (1996)). López (1996) and López et. Al (1996) pointed out new avenues of research. Looking closer to the Colombian National Accounts and correcting data inadequacies, they suggested that the behavior of private consumption was not the main factor behind the sharp drop in private savings in the 1990s. According to these studies, the consumption of durable goods after the trade reform could not be blamed for the decline in the private saving rate. In fact, the latter was falling since 1998 and, until 1993, the trade reform did not cause a stock adjustment of durable goods. Moreover, they argued that the private consumption boom of the 1990s did not happen , leaving without foundation most of the traditional explanations of the decline in private savings. In contrast to the prolonged and significant increases of private savings. In contrast to the prolonged and significant increases of private consumption observed in the contrast to the prolonged and significant increases of private consumption observed in the early 1960s and 1980s, this aggregate only increased 2% of GNP in 1992. The higher growth of consumption between 1991 and 1993 was matched by a similar increase on the rate of growth of labor per-capita income, wich rose 4.3% in 1991-1993 compared to 2.4% per annum during 1950-1990. As a consequence, the potencial explanatory power of the a reassessment of permanent income and financial liberalization as determinants of private consumption in the 1990s was reduced. The behavior of the private saving rate in the 1990s was mainly seen in these studies as the result of a secular decline in private disposable income, closely linked to tax increases. Howevwr, given that disposable income of corporations is equivalent to corporate savings, to have a better understanding of Colombian private savings. Figure 1 shows that the stability of the National Account measure of private saving observed between 1970 and 1990 was hiding a small but secular decline in household savings (almost equivalent to 4% of GNP) which was compesated by an increase in corporate savings returned to the levels attained during 1970 and 1985. The study by Sanchez et. Al (1996) has been the first attempt to understand the rise and fall of corporate savings observed in the period 1983-1994. Using micro evidence, their results indicate that collapse of this aggregate in the early 1990s was not reflected in investment because there was almost a perfect substitution of domestic savings by collapse of the private saving rate (i.e. trade and financial liberalization) played a significant role through their effects on corporate behavior, as they relaxed liquidity corporate savins should remain an open question for future research.

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.

File URL: http://www.banrep.gov.co/docum/ftp/borra058.pdf
Our checks indicate that this address may not be valid because: 403 Forbidden. If this is indeed the case, please notify (Clorith Angélica Bahos Olivera)


Download Restriction: no

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 003734.

as
in new window

Length: 31
Date of creation: 30 Sep 1996
Date of revision:
Handle: RePEc:col:000094:003734
Contact details of provider:

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.:

as in new window
  1. Kennan, John, 1979. "The Estimation of Partial Adjustment Models with Rational Expectations," Econometrica, Econometric Society, vol. 47(6), pages 1441-55, November.
  2. Bean, Charles R, 1986. "The Estimation of "Surprise" Models and the "Surprise" Consumption Function," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 497-516, August.
  3. Bagliano, Fabio C., 1994. "Do anticipated tax changes matter? Further evidence from the United Kingdom," Ricerche Economiche, Elsevier, vol. 48(2), pages 87-108, June.
  4. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  5. Reinhart, Carmen & Ogaki, Masao & Ostry, Jonathan, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," MPRA Paper 6978, University Library of Munich, Germany.
  6. Mankiw, N Gregory & Rotemberg, Julio J & Summers, Lawrence H, 1985. "Intertemporal Substitution in Macroeconomics," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 225-51, February.
  7. Nickell, Stephen, 1985. "Error Correction, Partial Adjustment and All That: An Expository Note," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(2), pages 119-29, May.
  8. John Y. Campbell, 1986. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," NBER Working Papers 1805, National Bureau of Economic Research, Inc.
  9. Corbo, Vittorio & Schmidt-Hebbel, Klaus, 1991. "Public policies and saving in developing countries," Journal of Development Economics, Elsevier, vol. 36(1), pages 89-115, July.
  10. Poterba, James M, 1988. "Are Consumers Forward Looking? Evidence from Fiscal Experiments," American Economic Review, American Economic Association, vol. 78(2), pages 413-18, May.
  11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  12. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
  13. Favero, C. & Hendry, D., 1990. "Testing The Lucas Critique: A Review," Economics Series Working Papers 99101, University of Oxford, Department of Economics.
  14. Campbell, John Y. & Mankiw, N. Gregory, 1991. "The response of consumption to income : A cross-country investigation," European Economic Review, Elsevier, vol. 35(4), pages 723-756, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:col:000094:003734. 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: (Clorith Angélica Bahos Olivera)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.