Are there restrictions to consumption smoothing in Latin American countries? Differences between OLS and GLS estimation

Humberto Carlos Faria Teixeira and João Issler

No 246, Econometric Society 2004 Latin American Meetings from Econometric Society

Abstract: We study empirically how close consumption-smoothing models employing present-value relationships fit data for Latin-American countries, either in an open-economy or closed-economy environment. Bivariate VARS are estimated using either individual-system or a joint-system techniques (OLS or GLS - SURE). The latter are more efficient, as is widely known. Interestingly, Wald-Test results for OLS estimates are consistent with consumption smoothing, while GLS are not. However, this last result contradicts previous literature on this issue, which have found that Latin-American countries conform to consumption-smoothing models, with free-capital mobility and no liquidity constraints, which seems odd, given these countries' recent history

Keywords: consumption; SURE; efficiency (search for similar items in EconPapers)
JEL-codes: C32 E21 F32 (search for similar items in EconPapers)
Date: 2004-08-11
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:latm04:246

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