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Testing The Permanent-Income/Life-Cycle Hypothesis With Aggregate Data

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  • Seater, John J.

Abstract

The aggregate implications of the permanent-income/life-cycle hypothesis (PILCH) are derived rigorously. Virtually all empirical rejections of PILCH based on aggregated data are shown to result from misspecifications or from characteristics of aggregate data that have been overlooked. Valid aggregate tests are proposed. Those based on a properly formulated aggregate consumption function may be superior to those based on Euler-equation methods.

Suggested Citation

  • Seater, John J., 1998. "Testing The Permanent-Income/Life-Cycle Hypothesis With Aggregate Data," Macroeconomic Dynamics, Cambridge University Press, vol. 2(3), pages 401-425, September.
    • Handle: RePEc:cup:macdyn:v:2:y:1998:i:03:p:401-425_00
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    Cited by:

    1. Hiroaki Hayakawa, 2020. "Consumer behavior in a monetary economy and smoothing of composite consumption," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(1), pages 89-122, March.
    2. Hiroaki Hayakawa, 2019. "Time Preferences, Intertemporal Optimization, and the Permanent Income-Life Cycle Hypothesis," Growth, Asian Online Journal Publishing Group, vol. 6(1), pages 1-11.

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