This paper presents an empirical investigation of the role of credit in the post-stabilization consumption booms of Mexico, Chile and Israel. Credit from the banking sector to the private sector expanded very rapidly following the stabilizations. I show that this increase in credit reduced the proportion of consumers that were liquidity constrained in the economy. This reduction in liquidity constraints could have helped to fuel the observed consumption booms.
The Role of Credit in Post-Stabilization Consumption BoomsMartina Copelman ,
Board of Governors of the Federal Reserve System International Finance Disc. Papers 569