Mahmud, Mir Nahid and Ahmed, Mansur (2012): Government expenditure and household consumption in Bangladesh through the lens of economic theories: an empirical assessment.
This is the latest version of this item.
Download (402kB) | Preview
The relationship between government and household consumption remains to be one of the contentious issues in both theories and empirics, though its’ immense importance in fiscal policy formulation. Like theories, the empirical studies regarding the relationship between government and household consumption provide opposing results. In this backdrop, the present study examines public-private consumption relationship for Bangladesh economy through the lens of economic theories using the cointegration and error correction modeling strategies to tackle the problem of non-stationary data. Two different variant of cointegration technique have been employed and in either case a valid long run positive relationship has been found. However, the error correction model has found an inverse relationship between public and private consumption in the short run. Finally, we test for Granger causality and find no long run causal relationship between government consumption and household consumption. In general, our finding goes with the Barro-Ricardian equivalence hypothesis of government spending that household consumption is unrelated with government consumption decision in the long-run.
|Item Type:||MPRA Paper|
|Original Title:||Government expenditure and household consumption in Bangladesh through the lens of economic theories: an empirical assessment|
|English Title:||Government Expenditure and Household Consumption in Bangladesh through the Lens of Economic Theories: An Empirical Assessment|
|Keywords:||Government Consumption, Household Consumption, Ricardian Equivalence, Cointegration|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household
H - Public Economics > H5 - National Government Expenditures and Related Policies
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E21 - Consumption; Saving; Wealth
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents
|Depositing User:||Mansur Ahmed|
|Date Deposited:||18. Jan 2012 21:57|
|Last Modified:||12. Feb 2013 13:38|
Ahmed, S. (1986). “Temporary and Permanent Government Spending in an Open Economy”. Journal of Monetary Economics, 17, 197-224.
Aschauer, D. A., (1985). “Fiscal Policy and Aggregate Demand.” American Economic Review, 75, 117-127.
Bailey, M. J., (1971). National Income and the Price Level, New York: McGraw-Hill.
Barro, R. J., and X. Sala-I-Martin, (2004). Economic Growth, 2nd edition, MIT Press, Cambridge,MA.
Blejer, M and Cheasty, A. (1989). “ Fiscal Policy and Mobilization of Savings for Growth” in Blejer, M and K. Chu (eds), Fiscal Policy, Stabilization and Growth in Developing Countries, IMF, Washington DC.
Coenen, G and Straub, R. (2005). “Does Government Spending Crowd in Private Consumption? Theory and Empirical Evidence for the Euro Area” European Central Bank, Working Paper Series No:513.
Engle, R.F. and Granger, C.J., (1987). “Cointegration and Error-correction: Representation, Estimation and Testing”, Econometrica, 55, 251-276.
Feldstein, M. S. (1982). “Government Deficit and Aggregate Demand”, Journal of Monetary Economics, 9, 1-20.
Granger C.W.J. (1988). “Some Recent Development in a Concept of Causality”, Journal of Econometrics, 39, 199-211.
Granger, C.J and Newbold, P (19974). “Spurious Regression in Economics”, Journal of Econometrics, 2, 111-120.
Hall, R. (1978). “Stochastic Implications of the Life Cycle –Permanent Income Hypothesis: Theory and Evidence” Journal of Political Economy, 86, 971-87.
Hossain, A. (1996). “Fiscal Policy and Domestic Resource Mobilization for Growth” in Macroeconomic Issues and Policies in Bangladesh, Sage Publication, New Delhi, London.
Islam, M. Q and Wahid A.N.M. (1996). “ The Fiscal Policy of Bangladesh: Budgetary Balance and Foreign Dependence” in The Economy of Bangladesh: Problems and Prospect edited by Wahid A.N.M and Weis C. E. , Praeger Publishers, Westport, Connecticut and London.
Johansen S. and Juselius K. (1990). “Maximum Likelihood Estimation and Inference on Cointegration to the Demand for Money” Oxford Bulletin of Economics and Statistics, 52, 169-210.
Karras, G, (1994). “Government Spending and Private Consumption: Some International Evidence” Journal of Money, Credit and Banking, 9-22.
Keynes, J.M. (1936). “The General Theory of Employment, Interest and Money”, Macmillan ,London, United Kingdom.
Kormndi, R, (1983). “Government Debt, Government Spending and Private Sector Behavior”, American Economic Review, 73, 994-1010.
Maddala, G, (2001). “Introduction to Econometrics”, Second Edition, Macmillan.
Wagner, A , (1890). “Finanzwissenschaft.” Leipzig, winter 3rd Edition
Available Versions of this Item
Government Expenditure and Household Consumption in Bangladesh through the Lens of Economic Theories: An Empirical Assessment. (deposited 18. Jan 2012 09:29)
- Government expenditure and household consumption in Bangladesh through the lens of economic theories: an empirical assessment. (deposited 18. Jan 2012 21:57) [Currently Displayed]