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Financial Liberalisation and Consumption Behaviour

Author

Listed:
  • Adrian Blundell-Wignall

    (Reserve Bank of Australia)

  • Frank Browne

    (Organisation for Economic Co-operation and Development)

  • Stefano Cavaglia

    (Organisation for Economic Co-operation and Development)

  • Alison Tarditi

    (Reserve Bank of Australia)

Abstract

The paper addresses the question of whether financial liberalisation and innovation have significantly altered consumption behaviour by reducing liquidity constraints as capital markets have become more flexible. A consumption model in which the permanent income hypothesis and extreme Keynesian consumption functions are nested as special cases is the starting point for this analysis. Estimated values for the sensitivity of consumption to current income for different time periods and for several OECD countries are assessed and compared in the light of various econometric properties, country-specific liberalisation measures and a variety of proxies reflecting changing liquidity constraints.

Suggested Citation

  • Adrian Blundell-Wignall & Frank Browne & Stefano Cavaglia & Alison Tarditi, 1992. "Financial Liberalisation and Consumption Behaviour," RBA Research Discussion Papers rdp9209, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp9209
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    File URL: http://www.rba.gov.au/publications/rdp/1992/pdf/rdp9209.pdf
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    References listed on IDEAS

    as
    1. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
    2. Adrian Blundell-Wignall & Frank Browne & Stefano Cavaglia, 1991. "Financial Liberalisation and Consumption Behaviour," OECD Economics Department Working Papers 81, OECD Publishing.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters,in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246 National Bureau of Economic Research, Inc.
    5. repec:fth:harver:1435 is not listed on IDEAS
    6. Williamson, Stephen D, 1987. "Financial Intermediation, Business Failures, and Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1196-1216, December.
    7. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
    8. Bernanke, Ben, 1985. "Adjustment costs, durables, and aggregate consumption," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 41-68, January.
    9. 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.
    10. Greenwald, Bruce C. & Kohn, Meir & Stiglitz, Joseph E., 1990. "Financial market imperfections and productivity growth," Journal of Economic Behavior & Organization, Elsevier, vol. 13(3), pages 321-345, June.
    11. West, Kenneth D, 1988. "Asymptotic Normality, When Regressors Have a Unit Root," Econometrica, Econometric Society, vol. 56(6), pages 1397-1417, November.
    12. Mankiw, N. Gregory, 1981. "The permanent income hypothesis and the real interest rate," Economics Letters, Elsevier, vol. 7(4), pages 307-311.
    13. Hayashi, Fumio, 1982. "The Permanent Income Hypothesis: Estimation and Testing by Instrumental Variables," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 895-916, October.
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