Real Private Consumption Modeling of Pakistan
This study estimated the real private consumption model for Pakistan by using the annual data from 1971 to 2013. The Autoregressive distributed lag model is used to investigate the short run and long run relationship between private consumption, labor income, wealth, interest rate and unemployment rate. In the short run, current income, wealth, real interest rate and unemployment rate affected the real private consumption growth while in the long run labor income and wealth are significant. The numerical value of the coefficient of error correction model (ECM) is -0.58, which propose that Pakistan’s real private consumption converge from disequilibrium in period (t-1) to equilibrium (t) on a high speed.
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