Consumption Behaviour in Zambia: The Link to Poverty Alleviation?



K. Ludi: consumption behaviour in Zambia

8

Kwatchas (millions)

LN_GCONS_ZK

Real general government
consumption expenditure

Constant 1994 Zambian

Kwatchas (millions)

Natural logarithm.

R_LENDRATE

Real lending rate

Per cent / annum

Nominal lending rate minus GDP-
deflator inflation. Missing data for
the year 1991 was calculated using
an average annual growth rate
formula.6

R_TBILL

Real treasury bill rate

Per cent / annum

Nominal treasury bill rate minus
GDP-deflator inflation. Missing data
for the years 1991 and 1992 were
calculated as above.6

All of the data used, apart from LN_GDP_CAPITA, is integrated of order one.7 Due to
the fact that GDP per capita is a ratio of two non-stationary series, it is regarded as
stationary, and thus is integrated of order zero.

4. Model and Estimation Results

4.1. Cointegration

Cointegration allows for non-stationary data series to be combined into a stationary series
through a linear combination. This represents the long-run relationship between the data
series. It was found in this case that real PCE in Zambia is dependent in the long run on
constant GDP, real short term lending rates and a dummy variable accounting for the
sudden and large decrease in PCE in 1992, largely as a result of the 30 per cent increase
in short-term interest rates in that period. It is expected using economic intuition that an
increase in national income will result in increased PCE and an increase in interest rates
should result in less PCE:

+  --

ln_cons_zk = f (ln_ gdp _ zk,r_lendrate,dum_92)                                (3)

1                1

( Lendrate1992 λ2 , √ tbill1993 λ3 ,
I--------------1992-1 -1 and I-------19931 -1.

^ Lendrate1990 J        ∣ tbill1990 J

See Appendix A for the unit root tests of all data used.



More intriguing information

1. Innovation Policy and the Economy, Volume 11
2. Testing Gribat´s Law Across Regions. Evidence from Spain.
3. Foreign direct investment in the Indian telecommunications sector
4. Food Prices and Overweight Patterns in Italy
5. Behavioural Characteristics and Financial Distress
6. Behavior-Based Early Language Development on a Humanoid Robot
7. The name is absent
8. Rent-Seeking in Noxious Weed Regulations: Evidence from US States
9. The name is absent
10. The name is absent