Consumption Behaviour in Zambia: The Link to Poverty Alleviation?

K. Ludi: consumption behaviour in Zambia

more economically realistic in explaining real PCE. The short-run regression that
explains real PCE in Zambia is therefore:

∆ ln Ct = ares _ co int _{t -} 1 + β₁ ∆ ln Y / capita_t - 1 + β₂ ∆ r _ tbill_t - 2 + β₃ ∆ ln M3_t - 2 +

β₄ ∆ ln G_t - 1 + β₅ ∆ ln T_t + β₆ ∆ r _ Iendrate + β₇ ∆ ln Inv_t - 1   ⁹                   ( 4 )

The results of the ECM regression are in table 3.

Table 3: Regression results of the error correction model (dependent variable: D(LN_CONS_ZK)¹⁰)

The coefficients of the independent variables may not be economically evaluated since
the variables have been differenced once. However, the variables may be statistically
evaluated. The t-statistics of all the independent variables are statistically significant at a
10 per cent level of significance. The adjusted-R² value indicates that 81 per cent of the
short-run variation in real PCE can be explained by the model. Real PCE in Zambia in

Where: Ct = real PCE; Yt /capita = real GDP per capita; r_tbillt = real treasury bill yield rates; M3t
= real M3 money supply; Gt = real government consumption expenditure; Tt = real net indirect tax
revenue; r_lendratet = real short-term lending rate; and Invt = real gross domestic capital
formation, all at time t.

D(...) indicates that a variable has been differenced once to remove non-stationarity.

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