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Journal of Applied Sciences

Year: 2014 | Volume: 14 | Issue: 21 | Page No.: 2862-2870
DOI: 10.3923/jas.2014.2862.2870
Empirical Analysis of the Relationship between the Consumption and Income Levels of Rural Residents in Anhui Province, China, Based on Econometric Tests and the Error Correction Model
Ke-Rong Zhang and Wu-Yi Liu

Abstract: In this study, the error correction model and econometric tests were used to empirically analyze the correlation of the income and consumption levels of rural residents during 1990-2012 in Anhui province, China, by means of the software Eviews 6.0. Based on the data generated and analyzed, the relationship between the rural consumption and income levels were confirmed and further explored. It was found that there was a statistically significant correlation between the levels of the rural income and the rural consumption from the point of view of elasticity coefficient, i.e., 0.858616, while the Pair-wise Granger causality test suggested the authors to accept the hypothesis that income precedes consumption in Anhui province. Together with the Granger causality tests, it was indicated that the elasticity of the variable X (income level) driving or promoting the variable Y (consumption level) was 0.858616 estimated in the Error Correction Model (ECM). That is to say, whenever the rural income level increases by 1%, the rural consumption level will be driven or promoted by 0.858616 in Anhui province.

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How to cite this article
Ke-Rong Zhang and Wu-Yi Liu, 2014. Empirical Analysis of the Relationship between the Consumption and Income Levels of Rural Residents in Anhui Province, China, Based on Econometric Tests and the Error Correction Model. Journal of Applied Sciences, 14: 2862-2870.

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