I chose to compare quarterly changes in Real Disposable Income measured in billions of chained 2009 dollars and changes in Real Personal Consumption Expenditure of Non-Durable Goods between 1/1/1991 and 12/1/2016. Following includes my time-series regression, its respective Engel Curve, another regression correcting for first-order auto correlation, and a conclusion based on my results.

Engel Curve

The REG Procedure

Model: MODEL1

Dependent Variable: NDGoods NDGoods

Number of Observations Read 72
Number of Observations Used 72

 

Analysis of Variance  
Source DF Sum of
Squares
Mean
Square
F Value Pr > F  
Model 1 96943 96943 2179.52 <.0001  
Error 70 3113.52385 44.47891      
Corrected Total 71 100056        

 

Root MSE 6.66925 R-Square 0.9689
Dependent Mean 310.61389 Adj R-Sq 0.9684
Coeff Var 2.14712    

 

Parameter Estimates
Variable Label DF Parameter
Estimate
Standard
Error
t Value Pr > |t|
Intercept Intercept 1 -24.47984 7.22062 -3.39 0.0012
RDI RDI 1 0.03145 0.00067370 46.69 <.0001
 

 

 

 

 

 

 

 

 

 

 

 

 

         
Engel Curve Controlling for Autocorrelation

The AUTOREG Procedure

Yule-Walker Estimates
SSE 1530.46157 DFE 69
MSE 22.18060 Root MSE 4.70963
SBC 437.899022 AIC 431.069024
MAE 3.3598497 AICC 431.421965
MAPE 1.09144035 HQC 433.788066
Durbin-Watson 2.1735 Regress R-Square 0.8722
    Total R-Square 0.9847

 

Durbin-Watson Statistics
Order DW Pr < DW Pr > DW
1 2.1735 0.7512 0.2488

 

NOTE: Pr<DW is the p-value for testing positive autocorrelation, and Pr>DW is the p-value for testing negative autocorrelation.

 

Parameter Estimates
Variable DF Estimate Standard
Error
t Value Approx
Pr > |t|
Variable Label
Intercept 1 -6.0331 14.6799 -0.41 0.6824  
RDI 1 0.0297 0.001368 21.70 <.0001 RDI

 

 

These regression results suggest that change in Real Disposable Income affects the change in Real Personal Consumption Expenditure of Non-Durable Goods. For this sample, an increase of 1 billion of chained 2009 dollars was associated with a subsequent rise of 0.0297 billions of chained 2009 dollars ($29,700,000) in Real Personal Consumption Expenditure of Non-durable goods. The coefficient of Real Disposable Income was highly statistically significant (p<.0001). The regression fit very well (R^2=0.9689, adjusted R^2=0.9847) and was highly statistically significant (F=2179.52 p<.0001).*

Relationship between Real Disposable Income and Real Personal Consumption Expenditure on Non-Durable Goods

2 thoughts on “Relationship between Real Disposable Income and Real Personal Consumption Expenditure on Non-Durable Goods

  • February 16, 2017 at 1:17 am
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    • February 16, 2017 at 1:46 pm
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