Forecasting of Households Consumption Expenditure with Nonparametric Regression: The Case of Turkey

Noyan Aydin Taner Akmercan
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Noyan Aydin Taner Akmercan: Faculty of Economics and Administrative Sciences, Department of Econometrics Kutahya, Turkey

Zagreb International Review of Economics and Business, 2016, vol. 19, issue 2, 19-32

Abstract: The relationship between household income and expenditure is important for understanding how the shape of the economic dynamics of the households. In this study, the relationship between household consumption expenditure and household disposable income were analyzed by Locally Weighted Scatterplot Smoothing Regression which is a nonparametric method using R programming. This study aimed to determine relationship between variables directly, unlike making any assumptions are commonly used as in the conventional parametric regression. According to the ?ndings, effect on expenditure with increasing of income and household size together increased rapidly at ?rst, and then speed of increase decreased. This increase can be explained by having greater compulsory consumption expenditure relatively in small households. Besides, expenditure is relatively higher in middle and high income levels according to low income level. However, the change in expenditure is limited in middle and is the most limited in high income levels when household size changes. JEL Classification: C14; D12

Keywords: Household Consumption Expenditure; nonparametric regression; LOESS (search for similar items in EconPapers)
Date: 2016
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