TITLE:
Empirical Analysis of Private Consumption in Lesotho: An ARDL Bound Test Approach
AUTHORS:
Moeti Damane
KEYWORDS:
Consumption, GDP, CPI, ARDL, Bounds Test
JOURNAL NAME:
Modern Economy,
Vol.9 No.3,
March
12,
2018
ABSTRACT: The study empirically
analyzes private consumption in Lesotho over the period 1982-2015 by employing
an Autoregressive Distributed Lag bound test approach to cointegration. The
results show that private consumption is positively influenced by the level of
national disposable income in the short run and long run. The Marginal
Propensity to Consume is highly significant and is less than 1. This proves the
Keynesian consumption theory in Lesotho. The research findings reveal that
increased government expenditure crowds out private consumption in the short
run and long run. A growth in the level of inflation has no effect on private
consumption. An expansion in the rate on deposits positively affects private
consumption in the short run. The policy recommendation given the results of
the study is that the government of Lesotho should implement initiatives aimed
at increasing employment as well as private sector development as espoused in
the country’s National Strategic Development Plan.