Exploring the Long-Run Relationship between GDP and Private Consumption of Romania through Cointegration Analysis

Raluca-Maria Bălă

Ovidius University Annals, Economic Sciences Series, 2014, vol. XIV, issue 1, 257-262

Abstract: The Romanian economy has been for a long time based on household consumption, as the private consumption accounts for more than 60% of GDP. The dependence between GDP and private consumption is of great importance for macroeconomic policies and has been extensively analyzed through econometric methods but the literature lacks studies of their long-run comovement by cointegration analysis. This paper examines the long-run relationship between GDP and private (household) consumption of Romania through cointegration analysis procedure. Results from the unit root tests reveal relatively conflicting outcomes and the Engle-Granger two-step residual-based cointegration procedure shows that GDP and household consumption do not share a longrun equilibrium relationship for the case of Romania in contrast with the expected results of the economic theory.

Keywords: Cointegration; GDP; Household Consumption; Engle-Granger (search for similar items in EconPapers)
JEL-codes: C22 E21 O11 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xiv:y:2014:i:1:p:257-262

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