A Re-examination of Private Consumption in Fiji

Kumar, Saten (2009): A Re-examination of Private Consumption in Fiji. Published in: Pacific Economic Bulletin , Vol. 24, No. 2 : pp. 70-81.

Abstract

Recently the Reserve Bank of Fiji (RBF) claimed that private consumption expenditure in Fiji has grown considerably in past years. For policy purposes, it is important to re-investigate the determinants of consumption in Fiji. This paper used alternative time series techniques to estimate real private consumption for Fiji using annual data from 1975-2005. It is found that the income and availability of consumer credit elasticities are significant and plausible. A stable real private consumption function is also attained using CUSUM and CUSUMSQ tests.

• Item Type: MPRA Paper
• Language: English
• Keywords: Real Private Consumption, Income Elasticity and Availability of Consumer Credit Elasticity.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

References

Bureau of Statistics, (various years) Current Economic Statistics. Suva: The Fiji Island Bureau of Statistics.

Campbell, J. and Mankiw, N. (1990) Permanent Income, Current Income, and Consumption, Journal of Business and economic Statistics, 8, pp.265-279.

Davidson, J.E.H., Hendry, D.F., Srba, F. and Yeo, S. (1978) Econometric Modelling of Aggregate Time Series Relationship between Consumers, Expenditure and Income in United Kingdom, The Economic Journal , 88, pp. 661-692.

Enders, W. (2004) Applied Econometric Time Series. 2nd edition. New Jersey: John Wiley.

Flavin, M. (1981) The Adjustment of Consumption to Changing Expectations about future income, Journal of Political Economy, 89 (5), pp. 974-1009.

Friedman, M. (1957) A Theory of Consumption Functions. Princeton: Princeton University Press.

Hall, R. (1978) Stochastic Implications of the Life- Cycle Permanent Income Hypothesis: theory and evidence, Journal of Political Economy, 86 (December): 971-987.

International Financial Statistics, December, 2005. IMF CD-ROM (Washington DC: International Monetary Fund).

Molana, H. (1990) The Time Series Consumption Function: Error Correction, Random Walk and Steady State, The Economic Journal, 101, pp. 382-402.

Murphy, C. (1992) Macroeconometric Model for Fiji, Staff Working Paper (04/1992). Canberra: The Australian National University.

Pesaran, M., and Pesaran, B. (1997) Working with Microfit 4.0. Oxford: Oxford University Press.

Quarterly Review, (various years). Suva: Reserve Bank of Fiji.

Rao, B. B. (2007) Estimating short and long run relationships: A guide to applied economists, forthcoming in Applied Economics.

Rao, B. (2005) Testing Hall's Permanent Income Hypothesis for a Developing Country: The Case of Fiji, Applied Economics Letters, 12(4), pp. 245-248.

Rao, B. and Singh, R. (2004) A Consumption Function for Fiji, The ICFAI Journal of Applied Economics, 4(3): 7-14.

Singh, B. (2004) Modelling Real Private Consumption Expenditure- An Empirical Study of Fiji, Staff Working Paper (01/2004). Suva: The Reserve Bank of Fiji.

The Asian Development Bank, (2005) Economic and Financial Update - 2005, Key Indicators of Developing Asia and Pacific Countries. Manilla: The Asian Development Bank.