Myopia, liquidity constraints and private consumption: the case of Cote d’Ivoire
In this paper, we estimate the behavior of private consumption in Cote d’Ivoire under the permanent income hypothesis using annual data for the period 1970–2016. The first objective is to test the validity of the permanent income hypothesis in Cote d’Ivoire. Our second concern is to investigate the...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2019-01-01
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| Series: | Cogent Economics & Finance |
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| Online Access: | http://dx.doi.org/10.1080/23322039.2019.1608052 |
| _version_ | 1818923719656996864 |
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| author | Yaya Keho |
| author_facet | Yaya Keho |
| author_sort | Yaya Keho |
| collection | DOAJ |
| description | In this paper, we estimate the behavior of private consumption in Cote d’Ivoire under the permanent income hypothesis using annual data for the period 1970–2016. The first objective is to test the validity of the permanent income hypothesis in Cote d’Ivoire. Our second concern is to investigate the reason explaining the rejection of this hypothesis. The data consists of real household consumption, real gross domestic product, and the real interest rate on deposits. The empirical analysis uses the nonlinear autoregressive distributed lag (NARDL) model proposed by Shin et al. This approach allows us to simultaneously test the short and long run nonlinearities through positive and negative partial sum decompositions of income. The results suggest that the absolute income hypothesis is valid rather than permanent income hypothesis. Also, there is evidence pointing to the rejection of the permanent income hypothesis-driven by the presence of liquidity constraints rather than myopia. As policy implications, the lending conditions of banks should be relaxed to increase the accessibility of households to credits. In addition, private consumption can be increased through income or consumption tax reductions. |
| first_indexed | 2024-12-20T02:13:54Z |
| format | Article |
| id | doaj.art-67a17fbc023143efbf001c0e6a94ad51 |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-12-20T02:13:54Z |
| publishDate | 2019-01-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-67a17fbc023143efbf001c0e6a94ad512022-12-21T19:56:59ZengTaylor & Francis GroupCogent Economics & Finance2332-20392019-01-017110.1080/23322039.2019.16080521608052Myopia, liquidity constraints and private consumption: the case of Cote d’IvoireYaya Keho0Ecole Nationale Supérieure de Statistique et d’Economie Appliquée (ENSEA)In this paper, we estimate the behavior of private consumption in Cote d’Ivoire under the permanent income hypothesis using annual data for the period 1970–2016. The first objective is to test the validity of the permanent income hypothesis in Cote d’Ivoire. Our second concern is to investigate the reason explaining the rejection of this hypothesis. The data consists of real household consumption, real gross domestic product, and the real interest rate on deposits. The empirical analysis uses the nonlinear autoregressive distributed lag (NARDL) model proposed by Shin et al. This approach allows us to simultaneously test the short and long run nonlinearities through positive and negative partial sum decompositions of income. The results suggest that the absolute income hypothesis is valid rather than permanent income hypothesis. Also, there is evidence pointing to the rejection of the permanent income hypothesis-driven by the presence of liquidity constraints rather than myopia. As policy implications, the lending conditions of banks should be relaxed to increase the accessibility of households to credits. In addition, private consumption can be increased through income or consumption tax reductions.http://dx.doi.org/10.1080/23322039.2019.1608052consumption functionpermanent income hypothesisabsolute income hypothesisliquidity constraintscote d’ivoire |
| spellingShingle | Yaya Keho Myopia, liquidity constraints and private consumption: the case of Cote d’Ivoire Cogent Economics & Finance consumption function permanent income hypothesis absolute income hypothesis liquidity constraints cote d’ivoire |
| title | Myopia, liquidity constraints and private consumption: the case of Cote d’Ivoire |
| title_full | Myopia, liquidity constraints and private consumption: the case of Cote d’Ivoire |
| title_fullStr | Myopia, liquidity constraints and private consumption: the case of Cote d’Ivoire |
| title_full_unstemmed | Myopia, liquidity constraints and private consumption: the case of Cote d’Ivoire |
| title_short | Myopia, liquidity constraints and private consumption: the case of Cote d’Ivoire |
| title_sort | myopia liquidity constraints and private consumption the case of cote d ivoire |
| topic | consumption function permanent income hypothesis absolute income hypothesis liquidity constraints cote d’ivoire |
| url | http://dx.doi.org/10.1080/23322039.2019.1608052 |
| work_keys_str_mv | AT yayakeho myopialiquidityconstraintsandprivateconsumptionthecaseofcotedivoire |