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Further Evidence from Aggregate Data on the Life-Cycle-Permanent-Income Model

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Abstract

We estimate the path of aggregate consumption implied by the permanent income hypothesis by allowing for parameter variation dictated by the theory. Our evidence, obtained by applying the Kalman filter to U.S. data for 1929–2001, supports the proposed generalisation and the fluctuations in the parameter estimates comply with a priori theoretical expectations.

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Authors and Affiliations

  1. Department of Economics, University of Stirling, Stirling, FK9 4LA, Scotland, UK

    Jim Malley

  2. University of Dundee, Dundee, DD1 4HN, Scotland, UK

    Hassan Molana

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  1. Jim Malley
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  2. Hassan Molana
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Correspondence to Jim Malley.

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Malley, J., Molana, H. Further Evidence from Aggregate Data on the Life-Cycle-Permanent-Income Model. Empirical Economics 31, 1025–1041 (2006). https://doi.org/10.1007/s00181-006-0066-5

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  • DOI: https://doi.org/10.1007/s00181-006-0066-5

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