Hand-to-mouth, habit formation, and intertemporal elasticity of substitution behaviours in Asian developing countries

Abstract

ABSTRACT This paper aims to contribute to the literature by considering three main consumption behaviours in a general model and empirically testing those behaviours in the context of Asian developing countries from 2010 to 2019. Our main findings strongly confirm the hand-to-mouth and habit formation behaviours with their different roles in explaining private consumption dynamics in Asian developing countries. The parameter of hand-to-mouth behaviour ranges from 0.38 to 0.52, while the habit formation behaviour varies from 0.52 to 0.66. Interestingly, we do not observe any clear evidence of the intertemporal elasticity of substitution in investigated countries.