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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Inflation uncertainty and saving behaviour in North African countries
Author:Darrat, Ali F.
Year:1987
Periodical:African Review of Money, Finance and Banking - Supplement to 'Savings and Development'
Issue:1
Pages:69-77
Language:English
Geographic term:Maghreb
Subjects:inflation
consumption
External link:https://www.jstor.org/stable/23027195
Abstract:The present study uses time series data for the North African developing economies of Algeria, Libya, Morocco and Tunisia to assess empirically their consumption functions and to test the validity of the hypothesis submitted by A.S. DEATON (1977) that when inflation becomes unanticipated (uncertain), consumers' spending will be lower. Inflationary expectations utilized in the empirical analysis are assumed rational rather than static or adaptive. The empirical results for the four North African countries provide mixed evidence on the Deaton hypothesis. Although inflation uncertainty across all countries has a negative effect on consumption as postulated by Deaton, only in Algeria and Libya does it have a statistically significant effect. It was furthermore found that real income has a strong positive effect on consumers, spending in all four countries, and that liquid assets have some (rather weak) positive impact on consumption in Algeria and Libya. Monetary policy in all North African countries, therefore, does not seem to operate through direct wealth effect and the alternative portfolio balance approach to the transmission mechanism of monetary policy appears more attractive in these countries. Bibliogr., notes, ref., sum. in French.
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