Do Tunisian Risk to Go Towards a Second Revolution? Element of Response from Consumption Behavior

Malika Neifar

MPRA Paper from University Library of Munich, Germany

Abstract: The present paper aims to explore the Keynesian consumption-income relationship using Tunisian yearly time series data for the period 1970 to 2019. As in some economies, consumption expenditure is the largest component of the Gross Domestic Product (GDP) of Tunisian economy. For empirical investigation, the NARDL specifications of (Shin et al., 2014), is used to show that output have asymmetric effects once we introduce nonlinearity in the long run as well as in the short run through partial sum concept. The estimated model provides strong evidence for long-run asymmetric co-integration relationship between consumption and GDP changes (expansion and depression). In the short-run, consumption-output relation is found to be significant only in period of expansion, while in the long-run, consumption-output relationship in both recession and expansion period is highly significant suggesting that each of the partial sum of GDP changes leads to an increase in Tunisian consumption. Then Tunisians make optimistic expectations and even in bad economic condition they do not reduce their consumption spending in the long-run. This paper attempt to add some fresh empirical evidence to the debate about consumption function. It contributes to the existing macro-economic literature in many ways. First, it investigates a new specification of Keynesian consumption equation by adding expansion and depression dynamic to the linear static model. Secondly, it analyzes the consumption function by using NARDL bound testing approach for co-integration between the consumption and its determinants. Thirdly, it reconsider the stability question of the consumption function in Tunisia over time. Before any politic towards alleviation of the compensation fund, Tunisian government has interest to create a stable political and economic climate to encourage new investments, increase exports, and reduce imports, and have to decide urgently the promotion of renewable energies production to face bad news of rising oil price and exchange rate fluctuations which are ones of the important causes of high inflation. Otherwise, Tunisian risk to go towards a second revolution

Keywords: Tunisia; Consumption; GDP; Augmented Keynesian model; NARDL model (search for similar items in EconPapers)
JEL-codes: C22 E12 E21 (search for similar items in EconPapers)
Date: 2023-02-10
New Economics Papers: this item is included in nep-ara
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