Comparative Efficacy of Life-Cycle and Absolute Income Hypothesis in Pakistan

Ali, Syed Ammad; Ahmed, Qazi Masood

doi:10.1353/jda.2020.0005

Cited by 4 publications

(3 citation statements)

References 18 publications

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“…The findings confirm the presence of AIH and income ratchet effect in Pakistan. Ammad and Ahmed (2018) analyses the aggregate consumption function under the PIH for Pakistan based on the Cagan (1956) and Gujrati and Porter (2009) methodologies. Their study proves that there is no significant role of past consumption on the present consumption decision.…”

Section: Literature Reviewmentioning

confidence: 99%

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Regional Consumption Inequalities in Pakistan under Relative Income Hypothesis

Ishtiaq¹,

Tauheed²,

Ishtiaq³

2022

Forman J. econ. stud.

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In this paper panel analysis is being carried on original Relative Income Hypothesis (RIH) and its other modifications over the time span of 1998 to 2015. To furnish reliable and appropriate estimation, Households Integrated Economic Surveys (HIES) based consumption and income variables have been gone through various stages of data filtering. The findings of Feasible Generalized Least Squares (FGLS) significantly validate the relevance of three types of ratchet effects (income, consumption and habit) in provinces. Average Propensity to Consume is highest for Baluchi’s households followed respectively by Pashtuns, Punjabi, and Sindhi. The selection of constant slop model implies that province-wise there is no difference in magnitudes of ratchet effect obtained from various versions of RIH. All provinces make adjustments in long run to their consumption in response to income fluctuations. Estimated marginal consumption propensities are according to economic theory that shows smooth consumption path in short run as well in the long run. Polices should be formulated to switch consumer mind set from consumption oriented to saving oriented with the help of appropriate tool of fiscal and monetary policies.

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Section: Literature Reviewmentioning

confidence: 99%

“…As aggregate demand is highly influenced by one factor so precise assessment of consumption is required for effective economy administration (Khan and Ahmad , 2014). Consumption theory explains the nexus between consumption and income (Ammad and Ahmed, 2018;Bibi, 2010).…”

Section: Introductionmentioning

confidence: 99%

Regional Consumption Inequalities in Pakistan under Relative Income Hypothesis

Ishtiaq¹,

Tauheed²,

Ishtiaq³

2022

Forman J. econ. stud.

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show abstract

“…Changes in the current income affect current spending just to the degree that they are permanent, necessitating a recalculation of lifetime consumable assets. The impact of transient income increases on spending is expected to be minor (Ammad & Ahmed, 2020). Each of the three theories is based on the microeconomics theory of consumer decision.…”

Section: Introductionmentioning

confidence: 99%

Estimating Consumption Function for Central Asian countries: New Insights

Khan,

Tariq

2024

Preprint

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Consumption is a significant part of the Gross Domestic Product (GDP) that is influenced by income as argued by Keynes and Friedman. This paper empirically estimates the consumption function for four Central Asian economies (Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan) from 1993 to 2020. The empirical results reveal that income has a significant positive effect on consumption in the short and long run. The short-run results support the Keynesian Absolute Income Hypothesis, whereas, the long-run results support Milton Friedman’s Permanent Income Hypothesis. However, the coefficient value is greater than 1 in the case of Uzbekistan which is in contradiction with the consumption function, as Keynes argued that the marginal propensity to consume (MPC) value lies between 0 and 1 (0 < MPC > 1). The key finding of the study is, that in the case of Central Asian countries, the marginal propensity of consumption does not lie in the range proposed by Keynes and does not support the Absolute Income Hypothesis. In this regard, policies are required to increase savings and investment and keep consumption expenditures at optimal levels. These policy measures will contribute more effectively to boosting the economic growth of these economies.

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Financial factors and saving behavior of salaried class: A case study of Rawalpindi, Pakistan

et al. 2022

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Human economic decisions are based on their preferences and motivations, which maximize their degree of happiness and lead to a better outcome in their lives. The majority of saving decisions are made by households. Different demographic, societal, and economic factors influence these choices. This study uses primary data from 243 salaried class households to investigate the behavioral aspects that influence human decision making. The main factor that affects the decision to save money is financial hardship. Households of the salaried class experience financial stress due to impulsive behavior, consumer debt, consumer financing products, pro-consumptive behavior, family financial support, and domestic externalities. The marginal effects of the agreed upon region, or "agree" and "strongly agree," demonstrate that important factors play a role in determining financial stress. Consumer loans account for 7.5% of financial stress, family financial support for 3.8%, and domestic externalities for 4.3%. The marginal effects of the Ordinary Logit saving model in the accepted region demonstrate that consumer loans have a 3.5% impact on saving behavior, while pro-consumptive behavior has a 3.6% impact and domestic externalities have a 1.9% impact. The consumer loan, pro consumptive behavior, and domestic externalities all have a negative effect on the saving behavior of the salaried class, according to the saving OLOGIT model. Government should give pro saving households special incentives. Government can help consumers by providing expensive goods with 0% interest in the event of hire purchasing.

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Comparative Efficacy of Life-Cycle and Absolute Income Hypothesis in Pakistan

Cited by 4 publications

References 18 publications

Regional Consumption Inequalities in Pakistan under Relative Income Hypothesis

Regional Consumption Inequalities in Pakistan under Relative Income Hypothesis

Estimating Consumption Function for Central Asian countries: New Insights

Financial factors and saving behavior of salaried class: A case study of Rawalpindi, Pakistan

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