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Household Expenditure In Africa: Evidence Of Mean Reversion

Yaya, OlaOluwa S and Olalude, Gbenga A and Olayinka, Hameed A and Jimoh, Toheeb A and Adebiyi, Aliu A (2020): Household Expenditure In Africa: Evidence Of Mean Reversion.

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This present paper investigates the mean reversion in household consumption expenditure in 38 Africa countries, the expenditure series obtained as the percentage of nominal Gross Domestic Product (GDP), each spanning 1990 to 2018. Due to the small sample point of available time series of household expenditure, with possible structural breaks, the Fourier unit root test approach, allowing for modelling both smooth and instantaneous breaks in the expenditure series was utilised. The results showed non-mean reversion in the consumption expenditure pattern of Egypt, Madagascar, and Tunisia, while mean reversion was detected in the remaining 35 countries. Thus, the majority of African countries are on the verge of recession once shocks that affect the growth of GDP are triggered. Findings in this paper are of relevance to poverty alleviation programmes in those selected countries.

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