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What Drives Consumption Booms?

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  • Peter Montiel

Abstract

Consumption booms have been common in both industrial and developing countries, and several explanations have been offered for their occurrence. These include economy-wide wealth effects associated with favorable movements in the terms of trade or euphoric expectations triggered by macroeconomic reforms, Ricardian effects associated with fiscal stabilization, lending booms following financial liberalization, and a variety of distortions in intertemporal relative prices. Using a large cross-country sample of booms, this article assesses how widely applicable these explanations are. The key finding is that wealth effects linked to favorable movements in the terms of trade and anticipated improvements in macroeconomic performance seem to have been more important empirically than explanations relying primarily on fiscal phenomena or distortions in intertemporal relative prices. Copyright The Author 2000. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank . All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.

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  • Peter Montiel, 2000. "What Drives Consumption Booms?," The World Bank Economic Review, World Bank, vol. 14(3), pages 457-480, September.
    • Handle: RePEc:oup:wbecrv:v:14:y:2000:i:3:p:457-480
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    1. Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," Journal of Development Economics, Elsevier, vol. 46(2), pages 357-378, April.
    2. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," The World Bank Economic Review, World Bank, vol. 10(3), pages 565-591, September.
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    1. Enrique G. Mendoza & Marco E. Terrones, 2014. "An Anatomy of Credit Booms and their Demise," Central Banking, Analysis, and Economic Policies Book Series, in: Miguel Fuentes D. & Claudio E. Raddatz & Carmen M. Reinhart (ed.),Capital Mobility and Monetary Policy, edition 1, volume 18, chapter 6, pages 165-204, Central Bank of Chile.
    2. Kappler, Marcus & Reisen, Helmut & Schularick, Moritz & Turkisch, Edouard, 2013. "The Macroeconomic Effects of Large Exchange Rate Appreciations," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 24(3), pages 471-494.
    3. Mr. Marco Terrones & Mr. Enrique G. Mendoza, 2008. "An Anatomy of Credit Booms: Evidence From Macro Aggregates and Micro Data," IMF Working Papers 2008/226, International Monetary Fund.
    4. Fenech, Jean-Pierre & Yap, Ying Kai & Shafik, Salwa, 2014. "Can the Chinese banking system continue to grow without sacrificing loan quality?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 315-330.
    5. Emiliano Libman & Juan Antonio Montecino & Arslan Razmi, 2019. "Sustained investment surges," Oxford Economic Papers, Oxford University Press, vol. 71(4), pages 1071-1095.
    6. Oscar de Jesús Gálvez-Soriano & Miguel Ramírez-Loyola & Dixia Vega Valdivia, 2022. "Informalidad, pobreza y consumo en México: Evidencia empírica entre 1993 y 2019," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 17(2), pages 1-20, Abril - J.
    7. Arhan S. Ertan & Gürbüz Kıran, 2021. "Global financial environment or monetary transmission mechanism? The (special) dynamics of Turkey's external deficit after 2002," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4054-4076, July.
    8. M S Mohanty & Gert Schnabel & Pablo Garcia-Luna, 2006. "Banks and aggregate credit: what is new?," BIS Papers chapters, in: Bank for International Settlements (ed.), The banking system in emerging economies: how much progress has been made?, volume 28, pages 11-39, Bank for International Settlements.

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