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THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.80, # 2, 2023, pp. 4-13
FORECASTING OF ENGEL CURVE COMPONENTS WITH
THE APPLICATION OF ARIMA METHOD
ASIF ALIYEV
Control Systems Institute, Ministry of Science and Education Republic of Azerbaijan,
Baku, AZ1141
E-mail: msc.aaliyev@gmail.com
Received: September 15; accepted November 30, 2023; published online December 25, 2023
ABSTRACT
Engel curve coefficient is still actual to obtain some information about wellbeing and
poverty level in the country based on structure of households’ budget expenses, more
exactly through the ratio of food expenses on overall expenses. There exist numerous
researches in this course covering household demand behavior effects on Engel curve.
In the current paper we consider only middle-income group in population and ignore
other factors affecting as income interval changes. The question of interest is the
prediction of Engel curve components as an indicator of middle social group well-
being. The forecast of Engel curve components for the next few years is carried out
using ARIMA model.
Keywords: Engel curve components, middle social group, household, ARIMA
model, time series forecasting.
Jel Classification: C32, C53, D63
INTRODUCTION
According to Ernst Engel (1857) the poorer a family, the more portion of total
expenditures is to spend on food. Engel curves were widely studied by the application
of different econometric methods for different consumption items. Banks et al. (1997)
studied Engel curve and consumer demands employing non-parametric analyses.
Blundell et al. (1998) studied the consumer demands with the application of semi-
parametric methods and outlined the different demographical profiles of households
based on Engel curve. You (2003) used robust and standard models in his study where
food, transportation, and other expenditures were considered with Engel functions.
The role of household behavior effects as consumer on individual preferences is
widely reviewed in the work of Solomon (2006), aside the economics. Levie & Xu
(2007) found out that how households adjust their consumption on food, housing,
education, and other stuff to handle budget expenditures.
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