Financial deregulation and Irish consumption behaviour

Abstract

The objective of this study is to assess whether financial deregulation has had a statistically significant effect on Irish consumption behaviour. Specifically, the study asks whether financial deregulation has affected consumption behaviour by reducing liquidity constraints. Formal stability tests are used to test for diminished liquidity constraints as indicated by a decrease in the excess sensitivity of consumption to current income. Some evidence is presented to suggest that Irish liquidity constraints diminished in the 1980s compared with the 1960-70s, but the decline is small and is not (as yet) statistically significant.