THE NEXUS BETWEEN PRIVATE CONSUMPTION AND ECONOMIC GROWTH: EVIDENCE FROM WESTERN BALKAN COUNTRIES
Keywords:
private consumption, economic growth, Western Balkan, fixed effects, random effectsAbstract
The main aim of this paper is to highlight the effect and the importance of private consumption expenditure on the economic growth in the developing countries, thus to serve as a base of policy reforms in Western Balkans in regard of stimulation of private consumption for boosting their economic growth. In this regard, Ordinary Least Square, Fixed and Random effects techniques have been employed in order to determine the impact of the private consumption on the economic growth for the Western Balkan region: Albania, North Macedonia, Kosovo, Montenegro, Serbia and Bosnia & Herzegovina, for time spin 2000 – 2018. In addition, Hausman Taylor test has been utilized in order to choose the appropriate model among the fixed and random effect model. The findings of Hausman Taylor test reveal the random effects model as an appropriate for this analysis, suggesting a positive but insignificant relationship between private consumption expenditures and economic growth in the countries of the Western Balkan region. In addition, such insignificant effect of consumption reveal the need of the government to address the changes in the policies, yet keeping into consideration the short effect of consumption in the economic growth in the developing countries
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