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Financial Openness, Aggregate Consumption and Threshold Effects

Listed author(s):
  • Marwân-Al‐qays Bousmah

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille 2 - Université Paul Cézanne - Aix-Marseille 3 - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Daria Onori

    (LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique)

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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Paper provided by HAL in its series Post-Print with number hal-01477194.

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Date of creation: Aug 2016
Publication status: Published in Pacific Economic Review, 2016, 21 (3), pp.358--380. <10.1111/1468-0106.12178>
Handle: RePEc:hal:journl:hal-01477194
DOI: 10.1111/1468-0106.12178
Note: View the original document on HAL open archive server: https://hal-amu.archives-ouvertes.fr/hal-01477194
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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