CHEN Taiming：Analysis on the Influencing Mechanism of Trade Openness on Excess Sensitivity of Consumption

Abstract：This paper studies how trade openness affects excess sensitivity of provincial-level consumption.By theoretical and empirical study based on provincial panel data from 1985 to 2007, we find that trade openness has inverted U-shape effect on excess sensitivity of consumption.For more than 75% of the observations, trade openness increases excess sensitivity of consumption.We also find that, for observations with higher trade openness, trade openness decreases excess sensitivity of consumption.This means that expanding the extensive and intensive margins of trade is extremely important for reducing excess sensitivity of consumption.

Key words： Trade Openness    Excess Sensitivity of Consumption    Closed-economy Constraints

source:Finance & Trade Economics ,No.9,2015