Financial Liberalisation, Consumption and Wealth Effects in 7 OECD Countries

Ray Barrell and Professor E. Philip Davis ()

No 247, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: We estimate the impact of financial liberalisation on consumption in 7 major industrial countries, and find a marked shift in behaviour, notably a decline in short run income elasticities and a rise in short run wealth and interest rate elasticities. A corollary is that consumption equations estimated over both pre- and post-liberalisation regimes may be misleading, and either a form of testing as presented here or a shortening of the sample period may be appropriate for accurate forecasting and simulation.

Date: 2004-05
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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:247

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