ABSTRACT
The advent of the Central American Common Market in 1961 saw the beginning of a new economic era for El Salvador. This era was hoped to be the one of industrialisation and rapid economic growth based on the investment opportunities and economies of scale that the larger market would offer. The constant terms or intercepts of the consumption functions are statistically significant at the 0-01 level only for the consumption of non-durable goods. Inventory investment has been treated as an exogenous variable. Public consumption is made dependent on total tax revenues. Public investment is defined by identity as total tax revenues less government consumption, less public transfers, plus public internal and external borrowing, plus funds from the public agencies.
