TY  - JOUR
AU  - Lewis,Karen K.
TI  - Are Countries with Official International Restrictions "Liquidity Constrained?"
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5991
PY  - 1997
Y2  - April 1997
UR  - http://www.nber.org/papers/w5991
L1  - http://www.nber.org/papers/w5991.pdf
N1  - Author contact info:
Karen K. Lewis
Department of Finance, Wharton School
2300 SHDH
University of Pennsylvania
Philadelphia, PA 19104-6367
Tel: 215/898-7637
Fax: 215/898-6200
E-Mail: lewisk@wharton.upenn.edu
AB  - In this paper, I empirically examine consumption smoothing behavior across a broad group of countries using a unique data set that indicates whether residents in a country face an official government restriction.  I then ask whether the ex ante consumption movements among restricted countries differ from those of unrestricted countries.  To gauge the departure from standard consumption smoothing, I use the Campbell and Mankiw (1989, 1991) approach of regressing consumption growth on income growth and instrumenting with lagged variables.  Interestingly, I find that consumption growth for residents in countries that impose international restrictions has a significantly higher coefficient on income growth than for residents in countries without those restrictions.  Thus, a greater proportion of consumers facing international restrictions appear to act as though they are liquidity constrained according to the Campbell and Mankiw approach.  I also discuss alternative interpretations that do not depend upon liquidity constraints.
ER  -