Hong Kong's domestic economy has been through a roller coaster ride over the past decade. In early 2004, increasing the number of holidays as a strategy to boost domestic consumption was mooted. In this paper, we estimate the effect of holidays on private domestic consumption in Hong Kong. We do this by estimating both the long term and short-term consumption functions. Our estimates suggest that an additional day holiday per quarter would increase private consumption expenditure (PCE) by HKD 213 on a per capita basis. Although an extra day holiday could add 0.34% to GDP, policy makers should also consider the possible costs (e.g. cost of unproductive) of such a policy.
Copyright © 2008 John Wiley & Sons, Ltd.