Solarin, Sakiru Adebola, Shahbaz, Muhammad and Stewart, Chris (2018) Is the consumption-income ratio stationary in African countries? Evidence from new time series tests that allow for structural breaks. (Discussion Paper) Kingston, U.K. : School of Law, Social and Behavioural Sciences. 25 p. (Economics Discussion Papers, no. 2018-2)
Abstract
This paper examines whether the consumption-income ratio is stationary in 50 African countries. We use the residual augmented least squares (RALS-LM) unit root test that allows for structural breaks developed by Meng et al. (2014). The empirical evidence shows that the consumption-income ratio is stationary around structural breaks in most (44 out of 50) African countries. This is consistent with the predictions of most economic theory. The general finding of mean reversion implies that (policy) shocks are likely to have only temporary effects on the consumption-income ratio in most African countries.
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