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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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