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Aggregate consumption functions for India: A cointegration analysis under structural changes, 1919-86

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  • Anita Ghatak
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    Abstract

    This paper extends cointegration methodology to include the effect of possible structural changes on aggregate consumption behaviour in India during 1919-86. The only cointegrated relation is found to be a dynamic linear regression of lag order two, with 1944 as the year in which structural change began. The estimated short-run marginal propensity to consume (MPC) is greater than the long-run MPC. The estimates of the MPC are different from previous estimates for the Indian economy based on conventional econometrics. The initial year of structural change has been selected by extending the method of Perron and that of Zivot and Andrews.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/02664769822963
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Journal of Applied Statistics.

    Volume (Year): 25 (1998)
    Issue (Month): 4 ()
    Pages: 475-488

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    Handle: RePEc:taf:japsta:v:25:y:1998:i:4:p:475-488

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    1. Duck, N W, 1992. "UK Evidence on Breaking Trend Functions," Oxford Economic Papers, Oxford University Press, vol. 44(3), pages 426-39, July.
    2. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
    3. Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100 Elsevier.
    4. Simon Kuznets & Lillian Epstein & Elizabeth Jenks, 1946. "National Product Since 1869," NBER Books, National Bureau of Economic Research, Inc, number kuzn46-1, May.
    5. Hendry, David F, 1986. "Econometric Modelling with Cointegrated Variables: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 201-12, August.
    6. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    7. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    8. James G. MacKinnon, 2010. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
    9. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
    10. Alogoskoufis, George & Smith, Ron, 1991. " On Error Correction Models: Specification, Interpretation, Estimation," Journal of Economic Surveys, Wiley Blackwell, vol. 5(1), pages 97-128.
    11. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    12. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    13. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-92, December.
    14. Sargan, John Denis & Bhargava, Alok, 1983. "Testing Residuals from Least Squares Regression for Being Generated by the Gaussian Random Walk," Econometrica, Econometric Society, vol. 51(1), pages 153-74, January.
    15. Spanos, Aris, 1989. "Early Empirical Findings on the Consumption Function, Stylized Facts or Fiction: A Retrospective View," Oxford Economic Papers, Oxford University Press, vol. 41(1), pages 150-69, January.
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