CONSUMPTION FUNCTION IN THE WESTERN BALKANS COUNTRIES

Yıl 2016, ICEBSS Özel Sayısı, 267 - 276, 06.11.2016

Jasmin Halebic

Öz

Anahtar Kelimeler

consumption function, marginal propensity to consume

CONSUMPTION FUNCTION IN THE WESTERN BALKANS COUNTRIES

Öz

In this paper relationship between consumption and income is examined in the Western Balkans countries in period 2005-2014. The relationship is explored in form of the Keynesian consumption function structured as a simple regression equation in which variations in consumption are explained by changes in income. Parameters obtained from the regression equation have signs in accordance with the standard economic theory. GDP (used as a proxy for income) has a positive and significant impact on private household consumption. The Hausman and the Breusch-Pagan Lagrangian test are also done in order to decide between usage of random or fixed effect techniques, and after that between random effect and ordinary least square techniques. Marginal propensity to consume appears to be less than average propensity to consume (APC) implying a decrease in APC through time. Consumption expenditures of this group of countries conform to models based on the Keynesian consumption function.

 

Household consumption expenditures are estimated for period 2015-2017 by usage of the World Bank projections and the resulting figures predict an increase in consumption. Policy recommendation from the model used in this paper is that economic growth could be boosted by reducing the factors that influence consumption such as taxes.

Anahtar Kelimeler

consumption function, marginal propensity to consume, gross

Kaynakça

• Amin, B., 2015. Test of Keynesian Consumption Function: a Case Study of University of the Punjab. Management and Administrative Sciences Review, 4 (5), pp. 787-800.
• Ando, A. & Modigliani, F., 1963. Hypothesis of Saving: Aggregate Implications and Tests. American Economic Review, 53 (1), pp. 55-84.
• Backhouse, R.E. & Bateman, B.W., 2006. The Cambridge Companion to Keynes. Cambridge University Press.
• Bayar, A. & Morro, K.Mc., 1999. Determinants of Private Consumption. Economic Papers, 135. Brussels, 32 pp.
• Blanchard, O., Amighini, A. & Giavazzi, F., 2010. Macroeconomics: a European Perspective. Pearson Education Limited.
• Blanchard, O. & Leigh, D., 2013. Growth Forecast Errors and Fiscal Multipliers. IMF Working paper, WP/13/1. International Monetary Fund.
• Bogovic, N.D., 2002. Long-term Characteristics of Personal Consumption in the Republic of Croatia. Ekonomski pregled, 53 (7-8), pp. 622-639.
• Burns, A.F., 1995. Keynes’ Theory of Underemployment Equilibrium. In: Hazlitt, H., 1995. The Critics of Keynesian Economics. The Foundation of Economic Education, Inc., New York.
• Dadkhah, K., 2009. The Evolution of Macroeconomic Theory and Policy. Springer.
• Duesenberry, J.S., 1949. Income, Saving, and the Theory of Consumer Behavior. Cambridge, Harvard University Press.
• Ezeji, Ch.E. & Ajudual E.I., 2015. Determinants of Aggregate Consumption Expenditure in Nigeria. Journal of Economics and Sustainable Development, 6 (5), pp. 164-169.
• Friedman, M., 1957. A Theory of the Consumption Function. Princeton University Press.
• Greene, W.H., 2012. Econometric Analysis. 7th ed. Pearson Education Limited.
• Khan, Kh. et al., 2015. Determinants of Consumption Function in Case of China and G7 Countries. International Journal of Economics and Empirical Research.
• Mishra, P.K., 2011. Dynamics of the Relationship between Real Consumption Expenditure and Economic Growth in India. Indian Journal of Economics & Business, 10 (4).
• Hazlitt, H., 1995. The Critics of Keynesian Economics. The Foundation of Economic Education, Inc., New York.
• Hoover, K.D. Doctor Keynes: economic theory in a diagnostic science. In Backhouse, R.E. & Bateman, B.W., 2006. The Cambridge Companion to Keynes. Cambridge University Press.
• Hubbard, G.R., Anthony, P.O. & Rafferty, M., 2012. Macroeconomics. Pearson Education, Inc. Prentice Hall.
• Keynes, J.M., 2007. The General Theory of Employment, Interest and Money. Atlantic Publishers & Distributors (P) LTD.
• Miles, D. & Scott, A., 2005. Macroeconomics: Understanding the Wealth of Nations. John Wiley & Sons, Inc.
• Modigliani, F., 1986. The Debate over Stabilization Policy. Cambridge University Press.
• Nellis, J.G. & Parker, D., 2004. Principles of Macroeconomics. Pearson Education Limited.
• Romer, D., 2000. Keynesian Macroeconomics without the LM Curve. Journal of Economic Perspective, 14 (2), pp. 149-169.
• Tapsin, G. & Hepsag, A., 2014. An Analysis of Household Consumption Expenditures in EA-18. European Scientific Journal, 10 (16).
• Vasilev, A., 2015. Modeling Real Private Consumption Expenditure in Bulgaria after the Currency Board Implementation (1997-2005). Zagreb International Review of Economics & Business, 18 (1), pp. 81-89.
• Williams, J.H., 1995. An Appraisal of Keynesian Economics. In: Hazlitt, H., 1995. The Critics of Keynesian Economics. The Foundation of Economic Education, Inc., New York.