Consumption in South America: Myopia or liquidity constraints?

Fábio Augusto Reis Gomes, Lourenço Senne Paz

Research output: Contribution to journalArticle

9 Scopus citations

Abstract

In this paper, we consider Brazil, Colombia, Peru, and Venezuela for a study on aggregate consumption behavior, in which we test the life cycle-permanent income hypothesis prediction that consumption growth depends only on the interest rate. Nevertheless, our results suggest that in general predicted income is a relevant covariate. We checked for some possible reasons behind this result, namely liquidity constraints, myopia and perverse asymmetry. We found support for liquidity constrained consumers in Brazil and Colombia, and perverse asymmetry for Peru. Finally, the results were uninformative about consumption in Venezuela.

Original languageEnglish (US)
Pages (from-to)129-145
Number of pages17
JournalEconomia Aplicada
Volume14
Issue number2
DOIs
StatePublished - Apr 2010

Keywords

  • Consumption
  • Liquidity constraints
  • Myopia
  • Permanent income
  • South America

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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