CONSUMPTION, LIQUIDITY CONSTRAINTS AND ECONOMIC-DEVELOPMENT

The relationship between the severity of borrowing constraints for con sumers and the degree of economic development is analyzed for a group of fifty-nine countries. The estimates of the fraction of the consumer s who are constrained to borrow in each of the countries in the group are compared with economic indicators and proxies for economic indicat ors to reveal an inverse relationship between the severity of liquidit y constraints and the degree of economic development. Also, an inverse relationship between the severity of borrowing constraints and financ ial deepening indicates that financial liberalization in developing co untries would have interesting macroeconomic implications.