Open AccessAN ESSAY ON CONSUMPTION HYPOTHESES: EVIDENCE FROM PAKISTAN
Author(s) -
Khalid Khan,
Marguerite Wotto,
Saima Liaqat
Publication year - 2020
Publication title -
pakistan journal of humanities and social sciences research
Language(s) - English
Resource type - Journals
eISSN - 2663-922X
pISSN - 2663-9211
DOI - 10.37605/pjhssr.3.1.4
Subject(s) - economics , consumption (sociology) , consumption function , unemployment , private consumption , interest rate , unemployment rate , autonomous consumption , econometrics , real interest rate , demographic economics , macroeconomics , monetary economics , production (economics) , fiscal policy , aggregate expenditure , social science , sociology
In this study, the ARDL method is used to assess short-term and longterm relationships between private consumption, labor income, interest rate, wealth, and unemployment rate. The real private consumption model for Pakistan has been estimated by applying yearly data from 1990 to 2016. According to long-term estimates, income and wealth determine the actual national consumption. Nevertheless, the short run national private consumption is determined by current incomes, wealth, real interest rates, and the unemployment rate. Findings of this study reveal significant impact of all the observed determinants of consumption function i.e. real disposable income, wealth, real interest rate, and unemployment rate on aggregate consumption. Whereas it is noteworthy that the coefficient for wealth was minor but significant, depicting slight impact of wealth on consumption decision. These results support validity of AIH for Pakistan.