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

Behnam Nikbin and Saman Panahi
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Behnam Nikbin: Allameh Tabataba'i University, Tehran, Iran
Saman Panahi: Allameh Tabataba'i University, Tehran, Iran

International Journal of Economics and Financial Issues, 2016, vol. 6, issue 2, 653-659

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 auto-regressive distributed lag (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 gross domestic product 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. Error correction model 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; Auto-regressive Distributed Lag Approach; Error Correction Model (search for similar items in EconPapers)
JEL-codes: C13 C22 E21 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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