INFLATION AND CONSUMER SPENDING BEHAVIOR: A TIME-SERIES ANALYSIS

Abstract

This study investigates the dynamic relationship between inflation and consumer spending behavior through a time-series analytical approach. Using historical economic data, the research identifies trends and patterns that illustrate how fluctuations in inflation rates influence consumer purchasing decisions over time. The analysis incorporates key macroeconomic indicators and applies econometric models, including Vector Autoregression (VAR) and Granger Causality tests, to examine both short-term and long-term impacts. Findings reveal that persistent inflationary pressures tend to reduce consumers' real purchasing power, prompting shifts in expenditure priorities and saving behavior. Moreover, the study highlights differences in consumer responses across various income groups and spending categories. The results contribute to a deeper understanding of inflation’s behavioral implications and offer insights for policymakers aiming to stabilize consumer demand during inflationary cycles.