Estimating Longrun Consumption Function using ARDL Cointegration Method and Measurement Shortrun Consumption Function in Iran

Correct assessment of consumption functoin and estimation of marginal propensity to consume will help policy makers to use right instruments in confrontiny economic problems such as inflation and recession. The aim of this research is to estimate and analyze shortrun and longrun consumption function for income groups via stimation of ARDL cointegration relation in the period under consideration, 1982 - 2006. Results of the study showed a significant cointegration relationship. Marginal propensity for consumption has been estimated for low income group 0.97, for high income group 0.66 and 0.81 for the whole group. Calculated marginal propesity to consume in shortrun is 0.55.