Liquidity constraints and financial liberalization: the case for Asian developing countries

Abstract

The Euler equation model is used to determine the fraction of consumers who are liquidity constrained in ten Asian developing countries. Our estimates of the fraction of liquidity constrained consumers range between 0.5 and 0.9. We further investigate whether financial liberalization has resulted in the reduction of liquidity constraints in these countries. However the results find support for this only in the case of South Korea.