Household expenditure in Africa: evidence of mean reversion

Gbenga A. Olalude; OlaOluwa S. Yaya; Hammed A. Olayinka; Toheeb A. Jimoh; Aliu A. Adebiyi; Oluwaseun A. Adesina

doi:https://doi.org/10.59170/stattrans-2023-042

Household expenditure in Africa: evidence of mean reversion

Gbenga A. Olalude Department of Statistics, Federal Polytechnic Ede, Osun State, Nigeria ORCID:https://orcid.org/0000-0002-9950-0552 , OlaOluwa S. Yaya Economic and Financial Statistics Unit, Department of Statistics, University of Ibadan, Ibadan, Nigeria & Centre for Econometrics and Applied Research, Ibadan, Nigeria ORCID:https://orcid.org/0000-0002-7554-3507 , Hammed A. Olayinka Department of Mathematical Sciences, Worcester Polytechnic Institute, Worcester, Massachusetts, USA ORCID:https://orcid.org/0000-0002-9796-5276 , Toheeb A. Jimoh Department of Mathematics and Statistics, University of Limerick, Ireland ORCID:https://orcid.org/0000-0003-3830-7641 , Aliu A. Adebiyi Environmental Statistics Unit, Department of Statistics, University of Ibadan, Ibadan, Nigeria ORCID:https://orcid.org/0000-0002-6340-098X , Oluwaseun A. Adesina Department of Statistics, Ladoke Akintola University of Technology, Ogbomoso, Nigeria ORCID:https://orcid.org/0000-0001-6952-3991 Statistics in Transition new series, vol. 24, 2023, 3, pages: 171-186 Published online: 13 June 2023 https://doi.org/10.59170/stattrans-2023-042

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G. A. Olalude, O. S. Yaya, H. A. Olayinka, T. A. Jimoh, A. A. Adebiyi, O. A. Adesina. Article available under the CC BY SA 4.0 licence

ARTICLE

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ABSTRACT

This paper investigates the mean reversion in household consumption expenditure in 38 African countries; the expenditure series used were the percentage of nominal Gross Domestic Product (GDP), each spanning 1990 to 2018. Due to a small sample size of time series of household expenditure, with possible structural breaks, we used the Fourier unit root test approach, which enabled us to model both smooth and instantaneous breaks in the expenditure series. The results showed non-mean reversion in the consumption expenditure pattern of Egypt, Madagascar and Tunisia, while mean reversion was detected in the remaining 35 countries. Thus, the majority of African countries are on the verge of recession once shocks that affect the growth of GDP are triggered. Findings in this paper are of relevance to policymakers on poverty alleviation programmes in those selected countries.

KEYWORDS

household expenditure, poverty level, mean reversion, Africa.

JEL

C22; D19; H31

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