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Is the consumption-income ratio stationary in African countries? Evidence from new time series tests that allow for structural breaks

Author

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  • Solarin, Sakiru Adebola

    (Faculty of Business Multimedia University Malaka)

  • Shahbaz, Muhammad

    (Montpellier Business School)

  • Stewart, Chris

    (Kingston University London)

Abstract

This paper examines whether the consumption-income ratio is stationary in 50 African countries. We use the residual augmented least squares (RALS-LM) unit root test that allows for structural breaks developed by Meng et al. (2014). The empirical evidence shows that the consumption-income ratio is stationary around structural breaks in most (44 out of 50) African countries. This is consistent with the predictions of most economic theory. The general finding of mean reversion implies that (policy) shocks are likely to have only temporary effects on the consumption-income ratio in most African countries.

Suggested Citation

  • Solarin, Sakiru Adebola & Shahbaz, Muhammad & Stewart, Chris, 2018. "Is the consumption-income ratio stationary in African countries? Evidence from new time series tests that allow for structural breaks," Economics Discussion Papers 2018-2, School of Economics, Kingston University London.
    • Handle: RePEc:ris:kngedp:2018_002
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    References listed on IDEAS

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    More about this item

    Keywords

    consumption-income ratio; African countries; unit root tests; structural breaks;
    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
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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