Estimation of Private Consumption Function of Iran: Autoregressive Distributed Lag Approach to Co-integration


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Authors

  • Behnam Nikbin Allameh Tabataba'i University
  • Saman Panahi Allameh Tabataba'i University

Abstract

Considering consumption due to its pivotal role in economic growth and also aggregate demand and specially its long-run analysis have always been in the center of attention. In this study, we have estimated private consumption function, using ARDL approach and employing annual data during 1978-2012. Short-run elasticity of private consumption function regarding to its lag is 0.50 and to GDP is approximately 0.56. Also, the latter amount for long-run elasticity is 1.13. Furthermore, the estimation demonstrates a negative correlation between inflation and private consumption in both long-run and short-run relationships. ECM is estimated as well, and the coefficient is equal to -0.49 which shows the pace in which the private consumption function adjusts to its long-run equilibrium.Keywords: Consumption function, ARDL approach, ECMJEL Classifications: C13 C22 E21

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Published

2016-04-19

How to Cite

Nikbin, B., & Panahi, S. (2016). Estimation of Private Consumption Function of Iran: Autoregressive Distributed Lag Approach to Co-integration. International Journal of Economics and Financial Issues, 6(2), 653–659. Retrieved from https://econjournals.com/index.php/ijefi/article/view/1923

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