Consumption Behaviour in Zambia: The Link to Poverty Alleviation?



K. Ludi: consumption behaviour in Zambia

The actual coefficients for the regression of equation (1) can be found in table 2.

Table 2: Regression results of the cointegration equation (dependent variable: LN_CONS_ZK)

Sample (adjusted): 1971 2001

Included observations: 31 after adjustments

Variable

Coefficient

Std. Error

t-Statistic

Consistent with
Expectations?

Interpretation8

LN_GDP_ZK

0.999958

0.001639

610.0092

Yes

An increase in national income will
increase PCE. The effect is much
larger than that of the other
independent variables.

R_LENDRATE

-0.002285

0.000585

-3.903330

Yes

An increase in short-term lending
rates will increase the costs of
consumption, and thus decrease PCE.

DUM_92

-0.309545

0.038157

-8.112476

Yes

The dramatic decline in PCE in 1992,
will have an overall decreasing effect
on the aggregate PCE function.

R-squared              0.713131

Adjusted R-squared     0.692640

An Augmented Dickey Fuller (ADF) unit root test was performed on the residuals of the
cointegration equation, and it was concluded that the residuals are indeed stationary.9

4.2. The Error Correction Model (ECM)

The ECM represents the short-term relationship between the data series, and is based on
the proposition that a proportion of any disequilibrium from one period can be corrected
in the next period. Long-run effects are included in the short-run equation via the lagged
residuals of the cointegrating equation (
res_coint).

Attempts to estimate equation (2) as the ideal short-term situation were statistically
fruitless. Thus, other short-run factors were included to be statistically successful and

Due to the non-stationarity of the variables, the magnitudes of the coefficients cannot be
stringently evaluated, and the variables may not be statistically evaluated.

See Appendix B for the unit root tests of the cointegrating residuals.



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