Analysis of income consumption relationship in bulgaria and russia

analysis of income consumption relationship in bulgaria and russia

As to the relationship between coal consumption and economic growth, many in different countries, with coal price as a third variable, the panel data model using namely China, the United States of America, India, Germany, Russia and Japan. Economic Development in Malaysia: A Multivariate Cointegration Analysis. Marginal Propensities to Consume: An Analysis .. Генчев Е.Р. , Analysis of Income-consumption Relationship in Bulgaria and Russia. This paper focus on exploring the relationship between income and consumption in Bulgaria and Russia over the period – We use.

Corruption in the public administration and a weak judiciary have continued to be long-term problems, with presence of organized crime remaining very high. Unemployment rose for at least five quarters bringing Bulgaria's worst recession since the early s. Still, economic circumstances were not too severe when compared to the rest of Europe.

analysis of income consumption relationship in bulgaria and russia

Future prospects are tied to the country's increasingly important integration with the European Union member states. Reforms of the s and early s[ edit ] Members of the government promised to move forward on cash and mass privatization upon taking office in January but were slow to act. United Nations sanctions against Yugoslavia and Iraq —two of the country's most significant trading partners, took a heavy toll on the Bulgarian economy.

analysis of income consumption relationship in bulgaria and russia

The first signs of recovery emerged in when the GDP grew and inflation fell. The first round of mass privatisation finally began in Januaryand auctions began toward the end of that year. The second and third rounds were conducted in Spring under a new government. The loan was used to develop financial markets, improve social safety net programmes, strengthen the tax system, reform agricultural and energy sectors, and further liberalise trade.

The European Commissionin its country report, recognised Bulgaria as a functioning market economy, acknowledging the progress made by Prime Minister Ivan Kostov 's government toward market-oriented reforms.

Rebound from the February crisis[ edit ] In Aprilthe Union of Democratic Forces SDS won pre-term parliamentary elections and introduced an IMF currency board system which succeeded in stabilizing the economy.

The triple digit inflation of and has given way to an official economic growthbut forecasters predicted accelerated growth over the next several years. The government's structural reform program includes: Despite reforms, weak control over privatization led many successful state enterprises to bankruptcy.

Both governments failed to implement sound social policies. The economy really took off between and and growth figures quickly shot up, fluctuating between figures as high as 6.

Economy of Bulgaria - Wikipedia

Even in the last pre-crisis year,the Bulgarian economy was growing rapidly at 6. This led to some immediate international trade liberalization, but there was no shock to the economy.

Low interest rates guaranteed availability of funds for investment and consumption. For example, a boom in the real estate market started around At the same time annual inflation in the economy was variable and during the last five years — has seen a low of 2.

The Bulgarian government originally planned to adopt the Euro no sooner than Although Bulgaria will have to adopt the euro as a condition to membership, plans have since been postponed for better economic times. From a political point of view, there is a trade-off between Bulgaria's economic growth and the stability required for early accession to the monetary union. Bulgaria also has the lowest personal and corporate income tax rates in the EU, [38] [39] [40] as well as the second lowest public debt of all European Union member states at Industrial output suffered, as well as public services, exposing Bulgaria's overdependence on Russian raw materials.

analysis of income consumption relationship in bulgaria and russia

The global financial crisis started to apply downward pressure on growth and employment in the last quarter of The real estate market, although not plummeting, ground to a halt and growth is expected to be significantly lower in the short-to-medium run.

During the course ofthe grim forecasts for the effects of the global crisis on the Bulgarian economy largely materialized. The hypothesis rests on idea that consumption is made possible on the amount of money available for spending. Literature review Consumption accounts a significant proportion of national income, hence it is a main factor to promote economic growth.

Income and expenditure statistics, trends, analysis, forecasts

Hence for this reason, exploring the relationship between consumption and income, generally labeled as consumption function has played main role in economic theory since Keynes introduced Absolute Income Hypothesis AIH from The General Theory.

It expresses the functional income-consumption relation and all its determinants. It is a single mathematical function used to express consumption expenditure, it can be written as: The simple function is written as the linear function: Keynesian theorywhat is known as the Absolute Income Hypothesis AIHand postulates that the consumption level of a household only depends on its absolute level current level of income and ignores the potential future income.

The hypothesis also states that as income rises, consumption will also rise but not necessarily at the same rate. That means income-consumption relationship is not proportional.

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Unlike the Keynesian consumption theory is entirely based on the current income of the individuals while the concept of LCH assumes that all individuals consume a constant percentage of present value of their life income.

The life cycle model also assumes that all individuals save while they work in order to finance consumption after they retire. The key assumption is that all individuals choose to maintain stable lifestyles.

That means they keep their consumption levels approximately the same in every period instead of saving in one period to spend furiously in the next period.

analysis of income consumption relationship in bulgaria and russia

The theory makes three assumptions as follow: Interest rate is stable throughout the lift time of the consumer. The consumer does not inherit any assets. The life cycle model can be expressed as: In its simple form, the hypothesis argues that consumption is not by current income but depends on expected average income and transitory income.

The key conclusion of this theory is that transitory, short-term changes in income have little effect on consumer spending behavior. Friedman uses permanent income as the determinant of income. He split the consumption and income into permanent and transitory components.

analysis of income consumption relationship in bulgaria and russia

Ctp is permanent consumption, and Ct Ytp is permanent income, and Ytq is transitory income. Transitory income is the differences between permanent income and the measured income. Friedman concluded that the individual will consume a constant percentage of his or her permanent income and earners with low income level have a higher marginal propensity to consume while high income earners have a higher transitory element to their income and a lower than average propensity to consume.

Although, In general, there are many factors that may influence consumption, in this study, we only discuss about the relationship between income and consumption which is known as consumption function.

So all series examined in this paper, gross national income GNI per capita and household final expenditure consumption per capita are collected from World bank national accounts data. The data is annual and spans the time period fromtotal are 21 years. In this paper, we use the logarithm of Gross National income GNI as a proxy to represent income y and the logarithm of household final consumption as a proxy to represent the consumption expenditure C.

The gross national income consists of: Household final consumption expenditure formerly private consumption is a transaction of the national account's use of income account representing consumer spending. It consists of the expenditure incurred by resident households on individual consumption goods and services.