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Liquidity effects and precautionary saving in the Czech Republic

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  • Don Bredin
  • Keith Cuthbertson

Abstract

An aggregate consumption function for the Czech Republic since its transition to market status is estimated. Economic theory and the 'general to specific' methodology are used to guide the choice of dynamic equation. Previous empirical evidence on the consumption function in Eastern Europe focused on the centrally planned period and so faced the 'liquidity overhang' principle. A number of different variants are examined including alternative income variables and the rate of unemployment which would proxy income constrained consumers and precautionary saving. The results indicate that the size of the long-run income elasticity is affected by the inclusion of the unemployment variable which may reflect liquidity constraints and precautionary saving.

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  • Don Bredin & Keith Cuthbertson, 2002. "Liquidity effects and precautionary saving in the Czech Republic," Applied Financial Economics, Taylor & Francis Journals, vol. 12(6), pages 405-413.
    • Handle: RePEc:taf:apfiec:v:12:y:2002:i:6:p:405-413
    DOI: 10.1080/09603100110090181
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    Cited by:

    1. Aleksandar Vasilev, 2015. "Modeling Real Private Consumption Expenditure in Bulgaria after the Currency Board Implementation (1997-2005)," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 18(1), pages 81-89, May.
    2. Frank Barry & John Bradley & Michal Kejak & David Vavra, 2003. "The Czech economic transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 539-567, September.
    3. Bill Martin, 2009. "An Augmented UK Private Expenditure Function," Working Papers wp384, Centre for Business Research, University of Cambridge.

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