Testing the permanent-income hypothesis: new evidence from West-German states (Länder)

DeJuan, Joseph P.; Seater, John J.; Wirjanto, Tony S.

doi:10.1007/s00181-005-0035-4

Cited by 22 publications

(19 citation statements)

References 22 publications

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“…The evidence for US states [12] supports generally the permanent-income hypothesis. The evidence for West German states [9] supports the presence of excess smoothness. Overall the results are disparate and no specific conclusion can be made.…”

Section: The International Evidencementioning

confidence: 74%

“…Tests of this hypothesis in the literature were conducted for the US [8,12,20,21], for the UK [23,24], for OECD countries [22], for UK regions [11], for US states [12], and for West German states [9]. There is no clear pattern in the findings.…”

Section: The International Evidencementioning

confidence: 99%

“…Bagliano and Bertola [6,17] report an actual ratio of 0.64 for quarterly data, much higher than the one estimated with the data in this paper. Malley and Molana [8: Table 3, p. 1032, and [9] find statistically different theoretical ( 1 ) and empirical ( 0 ) impacts for Germany, with a range for 1 between 0.907 and 1.284, and a range for 0 between 0.093 and 0.351. These estimates for 0 are mostly higher than the empirical estimates of this paper which range between 0.0322 and 0.1129 (see column 6, Table 4).…”

Section: 938mentioning

confidence: 99%

“…*Address correspondence to this author at the Faculty of Business Administration & Economics, Haigazian University, Mexique Street, Kantari, Beirut, Lebanon; Tel/Fax: +961 1 349230; E-mail: samih.azar@haigazian.edu.lb If income follows an ARIMA(1,1,0) data generation process, with a partial autoregressive coefficient , then consumption ( C ) will react to the income innovation t +1 in the following manner [6][7][8][9][10][11]:…”

Section: Introductionmentioning

confidence: 99%

“…These three methods should yield the same size of the impact, and all must be equal if the RWPIH is true. Often the income process and the empirical regression of the income innovation on consumption are estimated separately, although some authors have estimated the model jointly, making it possible to test for the equality of the theoretical and empirical impacts, like [9] for example. Both procedures are followed in this paper.…”

Section: Introductionmentioning

confidence: 99%

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New Evidence on the Excess Smoothness of Consumption

Azar

2009

TOECONSJ

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: The purpose of this paper is to revisit the evidence on the excess smoothness of consumption within the permanent income model, by using recently available monthly data. Two formulations of the univariate process of personal disposable income are adopted: in the levels and in the log-levels. More than one sample is studied. Three different impacts are defined and measured. In theory, the three of them should be equal. The conclusion that is strongly supported is that these three impacts are significantly different from each other, implying that excess smoothness is still a feature of the data. However a weak version of the permanent income hypothesis is endorsed which is that consumption changes by the annuity value of revised expectations of future income. In other terms, permanent income innovations have a significant, although relatively small, effect on consumption. Terms of use: Documents in EconStor may

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Section: The International Evidencementioning

confidence: 74%