The Mystery Of Excessive Consumption Fluctuations In Emerging Markets

With the process of world economic integration and China's reform and opening up,global economic patterns and trade patterns have undergone dramatic changes.At the same time,in response to global economic integration,countries have begun to deregulate interest rates and exchange rates,and cross-border capital flows have become increasingly frequent.As a result,countries and regions with emerging economies have begun to adjust their financial repressive policies by introducing a series of reforms in interest rates,exchange rates,capital controls,etc.These measures have led to increased levels of financial marketization in emerging economies,which has boosted economic development,but at the same time,the contradiction of financial adequacy in emerging economies has become increasingly prominent,creating significant financial risks and increasing economic volatility.Following the theoretical logic of individual cross-period smoothing,consumption fluctuations should be smaller and should be smaller than output fluctuations,which has been the theoretical consensus of Western scholars for a long time and was also validated when the data for Western countries were validated.In recent years,however,many scholars have found that the characteristics of consumption volatility in emerging economies differ markedly from those in developed countries.Aguiar and Gopinath(2007),in a comparative study of 26 countries,concluded that excessive consumption volatility is common in emerging economies.These studies have led to excessive consumption volatility being seen as a typical feature of emerging economies.Since the typical characteristics of consumption volatility in emerging economies do not match the existing consumption theory and economic volatility theory,how to explain the causes of this phenomenon has become an important task for the academic community,this paper attempts to study the mystery of excessive consumption volatility in emerging economies from the perspective of financial marketization,by examining the relationshipbetween financial marketization and consumption volatility in emerging economies through panel data for eight emerging countries and territories from 1995-2017.First,the financial marketization index is constructed to measure the financial marketization in emerging markets,and then the data are statistically analyzed on the consumption volatility in emerging economy countries and regions,and finally the empirical study finds that(1)the financial marketization in emerging countries and regions will first increase the consumption volatility,and only after the threshold value is reached will the consumption volatility be suppressed.(2)At this stage,the level of financial marketization in the eight emerging countries and regions selected for this paper has not reached the threshold,and the development of financial marketization will increase consumption volatility.In recent years,the pace of financial market development and Reform in emerging countries and regions has been accelerated,and the level of financial marketization has been continuously improved.The impact of the level of financial liberalization on consumption volatility in some emerging economy countries and regions has exceeded thresholds,and reforms in financial marketization can reduce economic volatility.Therefore,countries with emerging economies,while maintaining financial moderation,should also steadily advance financial marketization reforms,which are conducive to reducing economic volatility and enhancing social welfare.