Effects of Transitory Shocks to Aggregate Output on Consumption in Poor Countries

Mark Gradstein and Brückner, Markus
Authors registered in the RePEc Author Service: Markus Brueckner

No 9658, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper provides instrumental variables estimates of the response of aggregate private consumption to transitory output shocks in poor countries. To identify exogenous, unanticipated, idiosyncratic and transitory variations in national output we use year-to-year variations in rainfall as an instrumental variable in a panel of 39 sub-Saharan African countries during the period 1980-2009. Our estimates yield a marginal propensity to consume out of transitory output of around 0.2. To explain this result we show, using instrumental variables techniques, that there is a significant negative effect of transitory output shocks on net current transfers and a significant positive and quantitatively large effect on the trade balance. An important implication is that frictions to private financial flows do not necessarily imply large effects of transitory shocks to aggregate output on private consumption in poor countries.

Keywords: Consumption; International capital flows; Net current transfers; Permanent income hypothesis; Risk sharing; Transitory output shocks (search for similar items in EconPapers)
JEL-codes: E21 F32 F35 F41 O55 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-afr, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://cepr.org/publications/DP9658 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Effects of transitory shocks to aggregate output on consumption in poor countries (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:9658

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP9658

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().