FINANCIAL LIBERALISATION, CONSUMPTION AND WEALTH EFFECTS IN SEVEN OECD COUNTRIES

Ray Barrell and E Davis ()

Scottish Journal of Political Economy, 2007, vol. 54, issue 2, 254-267

Abstract: We estimate the impact of financial liberalisation on consumption in seven 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: 2007
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