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Public and Private Consumption in Bangladesh: An Empirical Assessment

Author

Listed:
  • MAHMUD, MIR NAHID

    (Lecturer, Department of Economics, University of Dhaka)

  • AHMED, MANSUR

    (Research Associate, Bangladesh Ins titute of Development Studies (BIDS), Dhaka)

Abstract

The relationship between government and household consumption is one of the contentious issues in both theory and empirics although this has significant implications in fiscal policy. The empirical studies on the relationship between government and household consumption provide contrasting results. The present study examines public-private consumption relationship in the Bangladesh economy using the cointegration and error correction modeling approaches to tackle the problem of non-stationary data. Two different variants of cointegration technique have been employed and in both cases a valid long run positive relationship is found. However, the error correction model finds an inverse relationship between the two in the short run. In general, the findings go with the Barro-Ricardian equivalence hypothesis of government spending that household consumption is unrelated to government consumption decision in the long-run

Suggested Citation

  • Mahmud, Mir Nahid & Ahmed, Mansur, 2012. "Public and Private Consumption in Bangladesh: An Empirical Assessment," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 35(3), pages 79-102, September.
    • Handle: RePEc:ris:badest:0542
    as

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    More about this item

    Keywords

    Private consumption; Government consumption; Ricardian Equivalence;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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