Loss aversion or hand-to-mouth behaviour in private consumption models
New Zealand Economic Papers
; 2023.
Article
in English
| Scopus | ID: covidwho-2274286
ABSTRACT
This study empirically tests whether the loss aversion or hand-to-mouth theories of consumption behaviour is present in Fiji. The loss aversion hypothesis implies that consumers would maintain their consumption when income falls. To estimate this model, we apply the nonlinear autoregressive distributed lag model with annual data from 1981 to 2019. Our findings are in contrast to the predictions of the loss aversion hypothesis and support the hand-to-mouth hypothesis in Fiji. The results are robust to alternative measures of liquidity, and a sample that includes the COVID-19 pandemic. We contribute to the literature by providing evidence of nonlinearity's in the consumption-income association. The findings are useful for policymakers in developing countries for policies on economic growth and stabilization. © 2023 New Zealand Association of Economists Incorporated.
Full text:
Available
Collection:
Databases of international organizations
Database:
Scopus
Language:
English
Journal:
New Zealand Economic Papers
Year:
2023
Document Type:
Article
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