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Permanent Income, Current Income, and Consumption
John Y. Campbell and N. Gregory Mankiw
Journal of Business & Economic Statistics
Vol. 8, No. 3 (Jul., 1990), pp. 265-279
Stable URL: http://www.jstor.org/stable/1391964
Page Count: 15
You can always find the topics here!Topics: Consumer economics, Permanent income hypothesis, Economic growth models, Interest rates, Statistical models, Aggregate income, Consumer information, Datasets, Standard error, Economic models
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This article reexamines the consistency of the permanent-income hypothesis with aggregate postwar U.S. data. The permanent-income hypothesis is nested within a more general model in which a fraction of income accrues to individuals who consume their current income rather than their permanent income. This fraction is estimated to be about 50%, indicating a substantial departure from the permanent-income hypothesis. Our results cannot be easily explained by time aggregation or small-sample bias, by changes in the real interest rate, or by nonseparabilities in the utility function of consumers.
Journal of Business & Economic Statistics © 1990 American Statistical Association