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Estimating Expenditure Pattern and Permanent Income Hypothesis: Evidence from Kelantan Malaysia

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  • Mohd Ali, Ahmad Fahme

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

  • Mohd Radzi, Naziatul Aziah

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

  • Kosnin, Ruzanifah

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

  • Hassan, Suchi

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

  • Saidin, Siti Salina

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

Abstract

The purpose of this paper is to investigate the consumption function among households in Kelantan Malaysia based on the Permanent Income Hypothesis (PIH). This study used secondary data obtained from annual reports, as well as from published and non-published data between 2000 and 2016. The ARDL bound testing approach to deal with cointegration was applied to estimate the long run correlation between the variables. Meanwhile, the error correction method (ECM) was used to determine any short run correlation. This study found a large disparity between the elasticity to consume from current income and the elasticity to consume from permanent income among households in Kelantan. Therefore, it can be concluded that in the case of Kelantan, the PIH is valid.

Suggested Citation

  • Mohd Ali, Ahmad Fahme & Mohd Radzi, Naziatul Aziah & Kosnin, Ruzanifah & Hassan, Suchi & Saidin, Siti Salina, 2021. "Estimating Expenditure Pattern and Permanent Income Hypothesis: Evidence from Kelantan Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(2), pages 39-49.
    • Handle: RePEc:ukm:jlekon:v:55:y:2021:i:2:p:39-49
    DOI: http://dx.doi.org/10.17576/JEM-2021-5502-4
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    References listed on IDEAS

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    More about this item

    Keywords

    Kelantan; Malaysia; Permanent income hypothesis; income and expenditure elasticity; poverty;
    All these keywords.

    JEL classification:

    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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