Volume 4, Issue 1, March 2019, Page: 23-30
Long Run Determinants of Private Consumption Spending: Evidence from Nigeria
Joseph Chukwudi Odionye, Department of Economics, Faculty of Business Administration, AbiaState University, Uturu, Nigeria
Okanta Sunday Ukeje, Department of Banking and Finance, Faculty of Business Administration, AbiaState University, Uturu, Nigeria
Received: Jan. 8, 2019;       Accepted: Feb. 22, 2019;       Published: May 20, 2019
DOI: 10.11648/j.jbed.20190401.14      View  574      Downloads  90
Of great concern to policy makers and researchers are the factors that influence private consumption spending owing to the important role it plays in aggregate demand of a country. Thus, this study investigated the long run determinants of aggregate private consumption spending in Nigeriaover thequarterlyperiodsof 1981 to 2016. The Auto Regressive Distributed Lag Error-correction model (ARDL-ECM) was employed to take care of short-run dynamics. In line with theories, variables included in the model were disposable income, credit facility, financial assets, government expenditure, interest rate and inflation rate. The empirical results showed that in the short run, disposable income, financial assets, interest rate and government expenditure influence private consumption spending while disposable income, financial assets, credit facilities and government expenditures are the major long run determinants of private consumption spending in Nigeria. The result equally showed that disposable income has more impact on consumption spending in the long run than it has in the short run. The policy implication is that policy interventions directed towards these variables are essential to increase spending as a major component of aggregate demand.
Private Consumption, ARDL, Financial Assets, ECM, Credit Facility
To cite this article
Joseph Chukwudi Odionye, Okanta Sunday Ukeje, Long Run Determinants of Private Consumption Spending: Evidence from Nigeria, Journal of Business and Economic Development. Vol. 4, No. 1, 2019, pp. 23-30. doi: 10.11648/j.jbed.20190401.14
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Keynes, J. M. (1936) The general theory of employment interest and money, New York: Harcourt, Bruce and World.
Friedman, M. (1957). A Theory of the Consumption Function, Princeton University Press, Princeton. consumption.
Modigliani, F. & R. Brumberg (1954). Utility Analysis and the Consumption Function: An Interpretation of Cross-Section Data, In Post-Keynesian Economics, ed. K. Kurhira. New Brunswick, NJ: Rutger University Press.
Gabriela, C. (2007). “The wealth effect on consumption in the Portuguese economy.” Economic Bulletin, Banco de Portugal, 2007.
Odionye, J. C., Ugwuegbe, S. U. and Ibeleme, S. N. O (2015). “The effect of financial wealth on private consumption: Evidence from Nigeria.” British Journal of Economics, Management and Trade, 6 (4), 300-307.
Ezeji, C. E. and Ajudua, E. I. (2015). “Determinants of aggregate consumption expenditure in Nigeria.” Journal of Economics and Sustainable Development, 6 (5), 164-169.
National Bureau of Statistics (2012), Consumption Pattern in Nigeria, 2009/2010, NBS Abuja, Nigeria.
Harmonized Nigeria Living Standard Survey (2010).
World Development Indicators Report (2014).
Ernest S. O. & Fadiya B. B. (2011) Macroeconomic volatility and private consumption expenditure, implication for household welfare. A dynamic macro-econometric stochastic model. European journal of social sciences 20 (2).
Tsenkwo J. B (2011). Testing Nigeria‘s marginal propensity to consume (mpc) within the period 1980 – 2004, journal of innovative research in management and humanities 2(1) 15-25.
Akekere J. and Yousuo P. O. J (2012) Empirical analysis of change in income on private consumption expenditure in Nigeria. International journal of Academic Research in Business and Social Sciences. , 2(11).
Pesaran, M. H and Pesaran, B. (1997), Working with Microfit 4.0: Interactive Econometric Analysis. Oxford, Oxford University Press.
Pasaran M. H, Y. Shin & R. Smith (2001), Bound Testing Approaches to the Analysis of Level Relationships. Journal of Applied Economics, 16, 289-326.
Banerjee A. (1993), “Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data”. Oxford, Oxford University Press.
Tang, T. C. (2003). Japanese aggregate import demand function: Reassessment from the ‘bound’testing approach. Japan and the World Economy. 15: 419-436.
Shrestha, M. B and Chowdury, K (2007), “Testing Financial Liberalization Hypothesis with ARDL modelling approach, Applied Financial Economics 17: 1529-154.
Central Bank of Nigeria (2015). C. B. N. (2015) Statistical Bulletin.
Bimal S. (2004) Modelling real private consumption expenditure, An empirical study on Fuji.
Sakib- Bin A. (2011). Causal relationship between consumption expenditure and economic growth in Bangladesh”. World journal of social sciences(1) 2,158-169.
Ricardo M. Sousa Wealth effects on consumption: evidence from the Euro areaBanks and Bank Systems. 2010;5(2).
Kandil, M. and A. Mirzaie, (2006) Consumption and macroeconomic policies: Theory and evidence from developing countries, Journal of International Trade and Economic Development, 15, 469-491.
Browse journals by subject