Testing Nigeria’s Marginal Propensity to Consume (MPC) Within the Period 1980-2004
Keywords:
consumption function, marginal propensity, permanent income hypothesis, macroeconomic variableAbstract
The study is an attempt to gauge Nigeria’s marginal propensity to consume
(MPC),and average propensity to consume(APC).Relevant variables were identified and
data on them obtained spanning from 1980-2004.The econometrics methodology of unit
root, and co integration were used to determine the stationary and the long run relationship
among the variables. The computation of MPC and APC were carried out using the nominal
data obtained from the identified variables. The results of MPC and APC conform to
Keynes proposition that is less the one and stable, however our results for MPC though less
than one and stable exhibit the tendency to grow above one. This has serious policy
implications for saving, capital formation, and investment on whole. The author therefore
suggest for a policy to discourage consumption and encourage production.
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