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This paper was prepared for a volume on “The Effects of Temporary Shocks” that is to be published by the Institute of Economic and Statistics at: the University of Oxford. The authors are grateful to Mohsin S. Khan for helpful comments, and to Ravina Malkani for efficient assistance.
Commodity booms were experienced in oil, cocoa, coffee, copper, sugar, etc.
Throughout the paper, the superscript “T” will be used to denote traded goods, while the superscript “N” will be used to describe nontraded goods.
The superscript “G” denotes government.
With rationed credit, the supply of credit to the private sector could in principle appear as an independent variable in (18). However, this variable was not found to enter our estimated equations with a statistically significant coefficient.
Recall that remittances are included in the definition of household disposable income.
For a detailed discussion of the modelling and estimation of a consumption function using the approach employed here, see Haque and Montiel (1989).
The typical migrant worker moves to the Middle East, leaving his family at home. Despite exogenous shocks of various kinds, remittances have displayed a fair amount of inertia, reflecting the consumption needs of the family that has been left at home. This behavior is captured well by the coefficient of the lagged remittance variable.
For a fuller explanation of the solution of such models see Haque and Montiel (1991).
The model simulations and calculations for stability were all performed in TROLL.
For an analysis of the macroeconomic effects of fiscal deficiecs Pakistan see Haque and Montiel (1990).
In order to isolate the effects of the experiments that we were conducting, all equations were made to hold identically by means of adding in a calculated residual term to each equation.