Habibullah, Muzafar Shah and Smith, Peter
Financial liberalisation and liquidity constraints in Myanmar and Nepal: Some empirical evidence
Savings and Development, 2, .
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One important effect of financial liberalisation is to reduce liquidity constraints. The ability of households to borrow and adjust their financial portfolios has important implications for monetary aggregates and consequently for the conduct of monetary policy. To investigate whether financial liberalisation has reduced liquidity constraints in Myanmar and Nepal, we employ the Euler equation approach.
Our estimate of the fraction of liquidity constrained consumers is about 0.7 - 0.8. Further, our result suggests that financial liberalisation has resulted in the reduction of liquidity constraints in Nepal but not in Myanmar.
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