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

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  • Bãlã Raluca-Maria

    (Faculty of Cybernetics, Statistics and Economic Informatics / Department of Statistics and Econometrics, Bucharest University of Economic Studies, Romania)

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.

Suggested Citation

  • Bãlã Raluca-Maria, 2014. "Exploring the Long-Run Relationship between GDP and Private Consumption of Romania through Cointegration Analysis," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 257-262, May.
    • Handle: RePEc:ovi:oviste:v:xiv:y:2014:i:1:p:257-262
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    More about this item

    Keywords

    Cointegration; GDP; Household Consumption; Engle-Granger;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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