THE IMPACT OF THE DISPOSABLE NATIONAL INCOME AND GROSS INVESTMENT ON TOTA FINAL CONSUMPTION IN YEMEN DURING THE PERIOD (1991-2017)

Abstract

This paper aimed to study the impact of the disposable national income and gross investment on total final consumption in Yemen during the period (1991-2017), using the new econometric techniques of times series within an autoregressive distributed lag (ARDL) method to assess the relationship between the variables in the short and long term. This study relied on the analytical descriptive approach and the standard quantitative approach; the study concluded the following results:

• Stability tests using the unit root show that the variables are unstable at the (Level)، but they are stable in the first differences، as the result of the limits test for co-integration showed the existence of a long-term equilibrium relationship that goes from the independent variables (disposable national income and gross investment) to the dependent variable (total final consumption).
• The best model that has been reconciled according to the AIC standard for determinants of final consumption is ARDL (4, 2, 1).
• Disposable national income and gross investment explain about 99.9% of the change in total consumption during the study period.
• Most of the parameters are significant in the short term، as well as the significance of some parameters in the long term.
• The results of the analysis of the error correction model showed that there is a mechanism for error correction in the model، and that the final consumption function in the short term tends to balance in the long term، and that the error correction parameter is negative and significant.
• The estimated model is free of economic measurement problems represented by autocorrelation and the instability of the variance of the error limit، and the results of the estimators' stability tests also showed that the estimators of the model are stable.