Abstract
This study investigates the determinants of private consumption expenditure in Cote d’Ivoire using time series data from 1970 to 2016. The Autoregressive Distributed Lags bounds testing approach to cointegration is employed to depict the presence of a long run relationship between private consumption and its determinants and an error correction model is estimated to derive short run dynamics. The results show the presence of a long run relationship among the selected variables. In the long run, current income, wealth and government consumption expenditure play a positive role in determining private consumption, with the effect of current income being higher. Furthermore, consumption expenditure is negatively affected by inflation rate and real interest rate on deposits. In the short run, only income and wealth appear to have positive effects on private consumption while the effects of government consumption, inflation and interest rate were found to be insignificant. This study provides evidence for government to improve the level of private consumption.
Highlights
Household consumption expenditure plays a crucial role in determining the welfare of populations and the dynamic effects of economic shocks
Higher current income is associated with higher private consumption
The research findings reveal that government consumption has a positive effect on household consumption while inflation and real interest rate on deposits exhibit negative effects
Summary
Household consumption expenditure plays a crucial role in determining the welfare of populations and the dynamic effects of economic shocks. In most countries, it constitutes the largest component of gross domestic product. In Cote d’Ivoire, the share of household final consumption spending in GDP increased from 57.3% in 1970 to 63.5% in 1983 and reached a pic of 73.4% in 1992 [1]. It averaged around 68% over the period 2000-2016. A better understanding of these factors would provide valuable information which can be used to guide economic growth and poverty-reducing policies
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