Estimating the Short - Run and Long - Run Consumption Function Using the Absolute Income Hypothesis (A . I . H .)

Abstract

Annual data of nominal consumption expenditure and nominal total disposable income for the years 1962 - 1985 were used in this study to estimate the relationship between consumption and income for the Libyan household.

The results of this empirical study confirmed the theoretical findings of the subject matter.

The value of the marginal propensity to consume (MPC) in the short - run was approximately 0.27 while its value in the long - run was 0.30.