Are Countries with Official International Restrictions "Liquidity Constrained?" / Karen K. Lewis.

Format:

Book

Author/Creator:

Lewis, Karen K.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5991.

NBER working paper series no. w5991

Language:

English

Subjects (All):

Full employment policies--Congresses.

Full employment policies.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1997.

Cambridge, Mass. : National Bureau of Economic Research, 1997.

Summary:

In this paper, I empirically examine consumption smoothing behavior across a broad group of countries using a unique data set that indicates whether residents in a country face an official government restriction. I then ask whether the ex ante consumption movements among restricted countries differ from those of unrestricted countries. To gauge the departure from standard consumption smoothing, I use the Campbell and Mankiw (1989, 1991) approach of regressing consumption growth on income growth and instrumenting with lagged variables. Interestingly, I find that consumption growth for residents in countries that impose international restrictions has a significantly higher coefficient on income growth than for residents in countries without those restrictions. Thus, a greater proportion of consumers facing international restrictions appear to act as though they are liquidity constrained according to the Campbell and Mankiw approach. I also discuss alternative interpretations that do not depend upon liquidity constraints.

Notes:

Print version record

April 1997.

Includes bibliographical references.