Tests for Liquidity Constraints: a Critical Survey

46 Pages Posted: 4 Jul 2004 Last revised: 15 Sep 2010

See all articles by Fumio Hayashi

Fumio Hayashi

National Graduate Institute for Policy Studies; Harvard University - Department of Economics

Date Written: October 1985

Abstract

This paper surveys recent empirical work on tests for liquidity constraints.The focus of the survey is on the tests based on the Euler equation. After examining the technical aspects of the recent tests on aggregate time-series data and on micro data, the survey tries to evaluate their economic significance. The paper concludes that for a significant fraction of the population the behavior of consumption over time is affected in away predicted by credit rationing and differential borrowing and lending rates. However, the available evidence is shown to have failed in providing information necessary to calculate the response of consumption to changes in the time profile of income.The paper attributes the failure to the fact that not much attention in the literature has been paid to the cause of liquidity constraints.

Suggested Citation

Hayashi, Fumio, Tests for Liquidity Constraints: a Critical Survey (October 1985). NBER Working Paper No. w1720. Available at SSRN: https://ssrn.com/abstract=338790

Fumio Hayashi (Contact Author)

National Graduate Institute for Policy Studies ( email )

Roppongi 7-22-1
Minato-ku
Tokyo, 106-0032
Japan

HOME PAGE: http://https://sites.google.com/site/fumiohayashi/home

Harvard University - Department of Economics

Littauer Center
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
51
rank
369,678
Abstract Views
658
PlumX Metrics