What drives consumption booms?

Consumption booms have been common in both industrial and developing countr ies, and several explanations have been offered for their occurrence. These include economy-wide wealth effects associated with favorable movements in the terms of trade or euphoric expectations triggered by macroeconomic ref orms, Ricardian effects associated with fiscal stabilization, lending booms following financial liberalization, and a variety of distortions in-intert emporal relative prices. Using a large cross-country sample of booms, this article assesses how widely applicable these explanations are. The key find ing is that wealth effects linked to favorable movements in the terms of tr ade and anticipated improvements in macroeconomic performance seem to have been more important empirically than explanations relying primarily on fisc al phenomena or distortions in intertemporal relative prices.