Testing the Stochastic Implications of the Permanent Income Hypothesis Using Canadian Provincial Data
This paper utilizes relatively unexplored Canadian provincial-level data to investigate an old but still relevant question in macroeconomics as to whether consumption responds to income innovations in a manner consistent with the stochastic implications of the permanent income hypothesis (PIH). The empirical results obtained do not appear to be in accord with the PIH. Instead, consumption's response to income innovations is found to be much weaker than that predicted by PIH; in particular, the response displays an asymmetric pattern in the sense that it is much stronger for negative than positive income innovations. We interpret this evidence of asymmetry as indicative of the presence of liquidity constraints in provincial households. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2009.
Year of publication: |
2010
|
---|---|
Authors: | Dejuan, Joseph P. ; Seater, John J. ; Wirjanto, Tony S. |
Published in: |
Oxford Bulletin of Economics and Statistics. - Department of Economics, ISSN 0305-9049. - Vol. 72.2010, 1, p. 89-108
|
Publisher: |
Department of Economics |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Testing the permanent-income hypothesis : new evidence from West-German states (Länder)
DeJuan, Joseph P., (2006)
-
DeJuan, Joseph P., (2010)
-
A direct test of the permanent income hypothesis with an application to the US states
DeJuan, Joseph P., (2004)
- More ...