China and India have many in common, are geographically large developing countries with enormous populations, but with notably different economic systems. This paper focus on exploring the relationship between GDP and consumption behaviors in China and India over the period 1978-2006. We use GDP as a proxy to represent income and household final consumption as a proxy to represent consumption. The long run relations are estimated by ARDL (1, 1) model. We find that India’s consumption is in the line of theory. But the relationship between GDP and consumption in China is unique, in terms of a negative intercept, a negative time trend and a larger than one marginal propensity to consumption. This may due to two possible explanations. First, after almost 30 years high growth households in China are optimistic to their future incomes. They prefer to borrowing for smoothing their consumptions. Second, there might have winding income what are not in the statistics. Finally, we adopt a series of diagnostic tests to check if selected models are strong enough and analysis the results.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:sh-15360 |
| Date | January 2011 |
| Creators | Yu, Shengjin |
| Publisher | Södertörns högskola, Institutionen för samhällsvetenskaper |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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