RDP 2003-08: A Tale of Two Surveys: Household Debt and Financial Constraints in Australia Appendix A: Previous Studies on Liquidity Constraints

Gianni La Cava and John Simon

July 2003

Table A1: Studies Estimating the Proportion of Liquidity-constrained Consumers
Study
 
 		 Country and
period examined
 		 Econometric
technique
 		 Source of data
 
 		 Estimated proportion
of liquidity constrained
consumers
Hall and Mishkin (1982) US (1969–75)
 
 
 		 OLS regression to test RE-PIH. Sample
split into permanent income (random
walk) and liquidity-constrained (rule of
thumb) consumers 		Panel Study
of Income Dynamics
 
 		 20%
 
 
 
Hayashi (1985) US (1963–64)
 
 		 OLS and Tobit estimation of reduced-form
consumption equation. Sample
split into high/low-saving households 		Survey of Financial
Characteristics of
Consumers		 No estimate
 
 
McKibbin and Richards(1988) Australia (1971–87)
 
 		 OLS (IV) regression to test RE-PIH.
Sample split into permanent income
and liquidity-constrained consumers 		Aggregate time-series
 		 25% (1971–80)
20% (1980–87)
 
Jappelli and
Pagano (1989)		 US (1961–84);
Japan (1971–83);
Sweden (1965–83); Italy (1961–85);
UK (1961–83);
Spain (1961–84);
Greece (1965–82) 		OLS (IV) and maximum likelihood
estimation of reduced form
consumption function
 
 
 
 		 Aggregate
time-series
 
 
 
 
  		US: 21%;
Japan: 34%;
Sweden: 12%;
Italy: 58%;
UK: 40%;
Spain: 52%;
Greece: 54%
Zeldes (1989) US (1968–82)
 		 Tests for excess sensitivity in
Euler equations		 Panel Study
of Income Dynamics		 No estimate
 
Campbell and
Mankiw (1989)		 US (1953–86);
Japan (1959–86);
Germany (1962–86);
France (1970–86);
Italy (1973–86);
UK (1957–86);
Canada (1963–86) 		OLS and IV estimation of reduced
form consumption function
 
 
 
 
 		 Aggregate time-series
 
 
 
 
  		US: 48%;
Japan: 55%;
Germany: 65%;
France: 110%;
Italy: 40%;
UK: 22%;
Canada: 62%
Jappelli (1990) US (1983)
 		 Logit estimation of reduced form debt functions Survey of Consumer Finances 19%
 
Duca and Rosenthal (1993) US (1983)
 		 Probit estimation of reduced form debt functions Survey of Consumer Finances 30%
 
Blundell-Wignall,
Browne and Tarditi (1995)		 US (1960–92);
Japan (1961–91);
Germany (1961–92);
France (1964–91);
Italy (1962–91);
UK (1961–91);
Canada (1960–91);
Australia (1961–92)
 		 OLS and IV estimation of reduced
form consumption function over
various sub-periods
 
 
 
 
 
  		Aggregate
time-series
 
 
 
 
 
 
 		 1960s/70s → 1980s/90s
US: 60% → 57%
Japan: 42% → 26%
Germany: 41% → 104%
France: 31% → −2%
Italy: 70% → 16%
UK: 36% → 33%
Canada: 43% → 28%
Australia: 35% → 43%
Debelle and Preston (1995) Australia (1973–94) OLS and IV estimation of reduced form consumption function Aggregate time-series 43% (1973–82)
20% (1983–94)
de Brouwer (1996) Australia (1975–94) OLS and IV estimation of reduced form consumption function Aggregate time-series 24%
 
Olekalns (1997) Australia (1959–95) OLS and IV estimation of reduced form consumption function Aggregate time-series 21% (1959–83)
3% (1984–1995)