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Real interest rates, liquidity constraints and financial deregulation : private consumption behavior in the U.K.
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Sarno, Lucio and Taylor, Mark P. (1998) Real interest rates, liquidity constraints and financial deregulation : private consumption behavior in the U.K. Journal of Macroeconomics, 20 (2). pp. 221-242. doi:10.1016/S0164-0704(98)00055-X
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Official URL: http://dx.doi.org/10.1016/S0164-0704(98)00055-X
Abstract
We examine the effect of financial deregulation on consumption expenditure in the United Kingdom. A non-linear model for consumption which allows for liquidity constraints through a time-varying parameter dependent on a proxy for financial deregulation is estimated using non-linear instrumental variables. It is concluded that U.K. financial deregulation has significantly reduced liquidity constraints faced by consumers, allowing a higher percentage of the population to smooth consumption over time. The estimated path of the time-varying parameter, interpreted as the proportion of income going to liquidity-constrained households, is consistent with the process of U.K. financial deregulation.
| Item Type: | Journal Article | ||||
|---|---|---|---|---|---|
| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
| Journal or Publication Title: | Journal of Macroeconomics | ||||
| Publisher: | Elsevier BV * North-Holland | ||||
| ISSN: | 0164-0704 | ||||
| Official Date: | 1998 | ||||
| Dates: |
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| Volume: | 20 | ||||
| Number: | 2 | ||||
| Page Range: | pp. 221-242 | ||||
| DOI: | 10.1016/S0164-0704(98)00055-X | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access |
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