Econometrics Project
INTRODUCTION
LITERATURE REVIEW
The current economic crisis has become a major concern of all nations today. It has led policymakers and economists to rethink about the instrument for economics stability. One of the most damaging consequences of this crisis is the consumption instability, which negatively affects risk adverse agents’ welfare. As mentioned by Athahasoulis and van Wincoop (2000) as well as Pallage and Robes (2003), consumption instability could have detrimental consequences for the accumulation of human capital and physical capital. Therefore, the study of the relationship between the economic indicators such as household consumption, GDP growth, GNI per capita and inflation rate is necessary and important in order to contribute to the economic stability as well as the economic growth. This paper examines the impact of GDP growth, GNI per capita and inflation rate as independent variables on the total private domestic consumption, which is considered as the dependent variable. It takes in account data from set countries in year 2007, the year that indicates the entrance period of 2008 world economic crisis. The objective is to evaluate the impact of these independent variables on the total private domestic consumption through the econometrics tools for these set countries, which have been randomly chosen in function of the world geography repartition. In addition, we want to describe the economic relationship between those variables. For example according to Keynesian model, aggregate consumption is volatile rather than smooth because any change in current income is reflected by a change in consumption. Moreover, according to the economics theory, GDP growth is a measure of the social welfare. So it implies the notion of consumption as well as inflation rate.
METHODOLOGY
All data used in our econometrics model were secondary date whereby they were obtained from World Bank website taken from a specific year, which is 2007. Therefore, this is a
LITERATURE REVIEW
The current economic crisis has become a major concern of all nations today. It has led policymakers and economists to rethink about the instrument for economics stability. One of the most damaging consequences of this crisis is the consumption instability, which negatively affects risk adverse agents’ welfare. As mentioned by Athahasoulis and van Wincoop (2000) as well as Pallage and Robes (2003), consumption instability could have detrimental consequences for the accumulation of human capital and physical capital. Therefore, the study of the relationship between the economic indicators such as household consumption, GDP growth, GNI per capita and inflation rate is necessary and important in order to contribute to the economic stability as well as the economic growth. This paper examines the impact of GDP growth, GNI per capita and inflation rate as independent variables on the total private domestic consumption, which is considered as the dependent variable. It takes in account data from set countries in year 2007, the year that indicates the entrance period of 2008 world economic crisis. The objective is to evaluate the impact of these independent variables on the total private domestic consumption through the econometrics tools for these set countries, which have been randomly chosen in function of the world geography repartition. In addition, we want to describe the economic relationship between those variables. For example according to Keynesian model, aggregate consumption is volatile rather than smooth because any change in current income is reflected by a change in consumption. Moreover, according to the economics theory, GDP growth is a measure of the social welfare. So it implies the notion of consumption as well as inflation rate.
METHODOLOGY
All data used in our econometrics model were secondary date whereby they were obtained from World Bank website taken from a specific year, which is 2007. Therefore, this is a