The Relationship between Income, Consumption and GDP of Asian Countries: A Panel Analysis

Abstract

This paper attempts to scrutinize the co-integration relationship between consumption, income and GDP per capita in panel data series. We have applied unit root test, co-integration test and FMOLS estimation technique to analyze the data. Data covers 11 Asian countries of three income categories – lower middle income, upper middle income and high income. The study contemplated the annual observations of 35 years from 1980 to 2014. Study revealed that the association between consumption and income is stronger in lower and upper middle income countries. The low level of income determines its maximum use predominantly for consumption. The relation between consumption, income and GDP per capita is stronger for lower middle income countries, thereby the countries with higher income generally tend to make big investments.

Keywords

• income
• consumption
• gdp
• panel unit roots
• panel cointegration