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Determinants of Consumption Function, In Case of China and G7 Countries

Author

Listed:
  • Khalid Khan

    (School of Economics, Huazhong University of Science and Technology, (HUST), Wuhan, P.R. China)

  • Chen FEI

    (School of Economics, Huazhong University of Science and Technology, (HUST), Wuhan, P.R. China)

  • Muhammad Abdul Kamal

    (School of Economics, Huazhong University of Science and Technology, (HUST), Wuhan, P.R. China)

  • Sarfaraz Ahmed Shaikh

    (School of Economics, Huazhong University of Science and Technology, (HUST), Wuhan, P.R. China)

Abstract

Purpose: The objective of the study is to estimate consumption function for China and G7countries. Methodology: The study applied ARDL approach to estimate consumption function over the period 1985 to 2013. Findings: The results of the study indicate that Gross Domestic Product (GDP) and wealth are the most important determinants of aggregate consumption in both short and long run. However, real interest rate, negatively affect the aggregate private consumption both in the long and short run, apart from Canada, similarly, unemployment rate have negative effect of aggregate consumption in all cases. Recommendations: This study open new directions for further research.

Suggested Citation

  • Khalid Khan & Chen FEI & Muhammad Abdul Kamal & Sarfaraz Ahmed Shaikh, 2015. "Determinants of Consumption Function, In Case of China and G7 Countries," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(4), pages 202-210, April.
    • Handle: RePEc:ijr:journl:v:3:y:2015:i:4:p:202-210
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    References listed on IDEAS

    as
    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
    3. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    4. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, May.
    5. 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 661-692, December.
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    Cited by:

    1. Saima Liaqat & Khalid Khan & Po Bunnika, 2018. "China9apos9s Consumption Function: An Empirical Test of Absolute and Permanent Income Hypothesis," Global Economics Review, Humanity Only, vol. 3(1), pages 90-97, June.
    2. Xi Wang & Bisharat Hussain Chang & Emmanuel Uche & Qianli Zhao, 2024. "The asymmetric effect of income and price changes on the consumption expenditures: evidence from G7 countries using nonlinear bounds testing approach," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(1), pages 35-53, January.
    3. Serkan Goksu, 2022. "Does Plastic Card Spending Have an Impact on Household Private Consumption Expenditures? Empirical Evidence Based on the ARDL Method," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-2), pages 845-875, December.
    4. Rosa Ferrentino & Luca Vota, 2022. "An Analysis of the Effectiveness of Japanese Monetary Policy Through a Statistical Mathematical Approach: a Simultaneous Equations Model (SEM)," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 11(1), pages 1-2.

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    More about this item

    Keywords

    Private Consumption; Gross Domestic Product (GDP); Wealth; Real Interest Rate;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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