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

  • Anita Ghatak
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    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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    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. Alogoskoufis, George & Smith, Ron, 1991. " On Error Correction Models: Specification, Interpretation, Estimation," Journal of Economic Surveys, Wiley Blackwell, vol. 5(1), pages 97-128.
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    4. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
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