Empirical Economics

, Volume 25, Issue 2, pp 351–368 | Cite as

Private consumption behaviour, liquidity constraints and financial deregulation in France: a nonlinear analysis

  • Eric Girardin
  • Lucio Sarno
  • Mark P. Taylor


This paper examines the effect of financial deregulation on consumption expenditure in France during the period 1970–1993. A nonlinear model for consumption which allows for liquidity constraints through a time-varying parameter dependent on a proxy for financial deregulation is estimated using nonlinear instrumental variables. It is concluded that in France financial deregulation has significantly reduced liquidity constraints faced by consumers, allowing a higher percentage of the population to smooth consumption over time. Evidence is also provided that the intertemporal elasticity of substitution is not significantly different from zero at conventional nominal levels of significance.

Key words: consumption, credit, liquidity constraints, Euler equation, financial liberalization, nonlinearity 
JEL classification: E21. 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2000

Authors and Affiliations

  • Eric Girardin
    • 1
  • Lucio Sarno
    • 2
  • Mark P. Taylor
    • 3
  1. 1.Université de la Mediterranée Aix-Marseille II Ceders, Faculté des Sciences Economiques et de Gestion 14, Avenue Jules Ferry, F-13621 Aix-en-Provence Cedex, FRANCEFR
  2. 2.University College, University of Oxford, Oxford OX1 4BH, United Kingdom (E-mail:
  3. 3.Warwick Business School, University of Warwick, Coventry CV4 7AL, UK (E-mail:

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