초록 close

The purpose of this study is to estimate the tobacco consumption function and identify the economic variables which affect the domestic tobacco demand. This paper employs Engle and Granger two-step cointegration technique and Johansen's multivariate cointegration methodology to avoid the spurious results, showing that the model is stationary as well as mean-reverting. Hence, we estimate the long-run equation and error-correction model. The empirical results show that while the higher tobacco price reduces the consumption in the long-run, the alcohol consumption adjusts the domestic demand in the short-run. This paper also applies variance decompositions and impulse-response functions to get additional information regarding the responses of the tobacco consumption to the shocks in domestic business and price. The results indicate that consumption responds positively to the business shock, but does negatively to the price shock. Furthermore, consumption responses to the price shock last longer and greater than those to the business shock do.