Excess sensitivity of consumption, liquidity constraints, and mandatory saving

Cheolbeom Park, Pei Fang Lim

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Using Singapore mandatory saving system, it is examined whether liquidity constraint is a major reason for the excess-sensitivity of consumption to predictable income growth. Although the mandatory saving rate for employees could be a good measure for the financial condition of a liquidity-constrained consumer, it is found, through the nonlinear instrumental variable estimation, that consumption growth is not sensitive to changes in the mandatory saving rate for employees. This finding suggests that liquidity constraints would not be a major reason for the excess-sensitivity puzzle.

Original languageEnglish
Pages (from-to)771-774
Number of pages4
JournalApplied Economics Letters
Volume11
Issue number12
DOIs
Publication statusPublished - 2004 Oct 10
Externally publishedYes

Fingerprint

Employees
Saving rate
Liquidity constraints
Excess sensitivity
Singapore
Financial condition
Consumption growth
Instrumental variable estimation
Liquidity
Income growth

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Excess sensitivity of consumption, liquidity constraints, and mandatory saving. / Park, Cheolbeom; Lim, Pei Fang.

In: Applied Economics Letters, Vol. 11, No. 12, 10.10.2004, p. 771-774.

Research output: Contribution to journalArticle

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