The effect of selected macroeconomic variable on the consumption and saving: A time series analysis on Turkey

In this study, private consumption expenditure which constitute a significant percentage of the Turkish GDP and personal saving rate which closely associated to private consumption expenditure's determinants were examined. While the determinants of private consumption expenditures were analyzed with quarterly data from the third quarter of 2000 to the second quarter of 2020, the relationship between private saving rates and selected variables was analyzed with annual data between 1980-2019. The stationarity tests of the variables were tested with traditional unit root tests, unit root tests with structural break and Fourier unit root tests. According to the unit root test results, the long-term relationship between non-stationary variables was examined by ARDL bound test, Gregory-Hansen structural break cointegration test and Fourier-Shin cointegration tests. According to the cointegration test results, it was determined that private consumption expenditures and private saving rates are long-term related with key macroeconomic variables and it was concluded that there are long-term relationships between the series. Income and wealth variables have positive impact on consumption expenditures whereas, public expenditures and exchange rate variables affect negatively. While the effect of the inflation variable was statistically insignificant, the effect of the change in interest rates on consumption was relatively insignificant. On the other hand, ARDL bound test results show that, per capita income, interest rate and current account balance series affect private savings positively, public savings, inflation rate and population dependency rate have a negative effect on private saving rate.