Importance of Financial Assets in Iran’s Private Sector Consumption: A Strategic View to Correct Consumption Pattern

Private sector consumption is among macroeconomic variables affecting economic structure of countries. It is influenced by policies of government and the central bank, on the one hand, and consumer habits of people, on the other hand. Most empirical studies on private sector consumption have focused on income and disposable income. This paper analyzes the impact of financial assets on private sector consumption model. Econometric analysis is done using Ordinary Least Squares (OLS) relying on short-term consumption function and seasonal data related to period between 1996:1 and 2010:4. Findings show that marginal propensity to consume (MPC) for disposable income is about 0.66 while MPC for financial assets is about 0.16. These findings conform to economic structure of developing countries. Therefore, monetary and financial policies should be formulated in such a way as to reduce consumption by affecting financial assets and disposable income