DO THE INCOME AND PRICE CHANGES AFFECT CONSUMPTION IN THE EMERGING 7 COUNTRIES? EMPIRICAL EVIDENCE USING QUANTILE ARDL MODEL

Raheel Gohar (), Salim Bagadeem (), Bisharat Hussain Chang and Muyu Zong ()
Additional contact information
Raheel Gohar: College of Business Administration, Al Yamamah University, Riyadh, Saudi Arabia
Salim Bagadeem: Faculty of Business Studies Arab Open University, Riyadh 11681 Saudi Arabia
Bisharat Hussain Chang: Department of Management Sciences, Shaheed Zulifqar Ali Bhutto Institute of Science and Technology, Larkana, Pakistan
Muyu Zong: School of Law Shanghai University, 200444, Shanghai, China

Annals of Financial Economics (AFE), 2022, vol. 17, issue 04, 1-24

Abstract: Various empirical studies have been conducted. However, these studies fail to examine the asymmetric effect of income and price across different quantiles of consumption in the emerging 7 countries. This study extends the existing literature using a novel approach called the quantile ARDL model along with the standard nonlinear ARDL model. Findings based on the nonlinear ARDL model indicate that positive shocks in income positively and significantly affect consumption in the short- and long-run. On the other hand, negative shocks in income do not significantly affect consumption which, therefore, suggests an asymmetric effect of income on consumption. In addition, the quantile ARDL estimates indicate that income positively affects consumption across all quantiles of the consumption except the 95th quantile. Moreover, the quantile ARDL estimates indicate that price variations negatively affect consumption across all emerging 7 countries. These estimates suggest that devising policies without considering the asymmetric effect may lead to unfavorable consequences.

Keywords: Nonlinear ARDL; quantile ARDL; consumption; E7 countries; distributional asymmetry (search for similar items in EconPapers)
JEL-codes: C22 E31 F31 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (38)

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DOI: 10.1142/S2010495222500245

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