02006cas a2200253 a 4500 AALejournalIMF013574 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484325988 1018-5941 BD-DhAAL BD-DhAAL Bhattacharya, Rudrani. Credit Constraints, Productivity Shocks and Consumption Volatility in Emerging Economies / Rudrani Bhattacharya, Ila Patnaik. Washington, D.C. : International Monetary Fund, 2013. 1 online resource (33 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students How does access to credit impact consumption volatility? Theory and evidence from advanced economies suggests that greater household access to finance smooths consumption. Evidence from emerging markets, where consumption is usually more volatile than income, indicates that financial reform further increases the volatility of consumption relative to output. We address this puzzle in the framework of an emerging economy model in which households face shocks to trend growth rate, and a fraction of them are credit constrained. Unconstrained households can respond to shocks to trend growth by raising current consumption more than rise in current income. Financial reform increases the share of such households, leading to greater relative consumption volatility. Calibration of the model for pre and post financial reform in India provides support for the model's key predictions. Mode of access: Internet Patnaik, Ila. IMF Working Papers; Working Paper ; No. 2013/120 Full text available on IMF http://elibrary.imf.org/view/journals/001/2013/120/001.2013.issue-120-en.xml IMF e-Library