SHORT AND LONG-RUN CORRECTED MARGINAL PROPENSITY TO CONSUME. POLISH ECONOMY IN THE PERIOD 1995–2018

Abstract

In the introductory part of the article – referring to Keynes’ theory – basic macroeconomic relations between global consumption and gross domestic product are discussed and defined. Next, an analysis of statistical information on private consumption expenditure of households (C) and global consumption expenditure of the society (CO) against the background of gross domestic product (GDP) in Poland in 1995–2018 was carried out. The analysis
of empirical material carried out allowed formulating preliminary assumptions regarding the analyzed macro-dependencies.
In the main theoretical part of the article – referring, inter alia, to the conclusions from the empirical part of the analysis – the research hypothesis was formulated, according to which: the relationship between real consumption (C or CO) and gross domestic product (GDP) is linear, inertial and subject to a correction mechanism. To verify the hypothesis, an autoregressive model of global consumption was formulated, which was subject to the error
correction mechanism (ECM). Based on the analytical form of the considered model, the following measures were defined:
— short-run, immediate uncorrected marginal propensity to consume (SrMPCim),
— short-run corrected marginal propensity to consume (SrMPCcrd),
— long-run corrected marginal propensity to consume (LrMPCcrd).
In addition, a switch trend function was defined that was assigned to the dynamic error correction model (ECM) under consideration.
In the empirical part of the article, two versions of the considered autoregressive consumption model with a correction mechanism were considered. In the first version of the model, real private consumption of households (C) was dependent on domestic product (GDP).
On the other hand, the second version makes the total consumption of the society (CO) dependent on the domestic product (GDP). Both versions of the model were estimated, verified and interpreted.
The analysis of the estimated versions of the model confirmed the theoretical research hypothesis according to which real consumption:
— is linearly dependent on the gross domestic product,
— is inertial,
— it is corrected in time.