Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence

@article{Hall1978StochasticIO,
  title={Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence},
  author={Robert Ernest Hall},
  journal={Journal of Political Economy},
  year={1978},
  volume={86},
  pages={971 - 987}
}
  • R. Hall
  • Published 1 December 1978
  • Economics
  • Journal of Political Economy
Optimization of the part of consumers is shown to imply that the marginal utility of consumption evolves according to a random walk with trend. To a reasonable approximation, consumption itself should evolve in the same way. In particular, no variable apart from current consumption should be of any value in predicting future consumption. This implication is tested with time-series data for the postwar United States. It is confirmed for real disposable income, which has no predictive power for… 
Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Evidence for the U.K. Economy
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The life-cycle-permanent-income model: a reinterpretation and evidence
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The consumption path associated with the life-cycle-optimising version of the permanent- income model is commonly agreed to be a random walk with drift. The persisting failure of the latter to
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Seasonal Fluctuations and the Life Cycle-Permanent Income Model of Consumption
  • J. Miron
  • Economics
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  • 1986
This paper examines a new possible explanation for the recent rejections of the life cycle-permanent income model of consumption: the treatment of seasonal fluctuations. The paper shows that when the
Consumption Over the Life Cycle: A Selected Literature Review
Simple life cycle and permanent income hypotheses imply that changes in consumption should be unforecastable. Rational forward-looking agents ought to smooth consumption over the life cycle and
Surprises in the Consumption Function, Incomplete Current Information, and Moving Average Errors: A Note [Stochastic Implications of the Life Cycle Permanent Income Hypothesis: Theory and Evidence]
In an important paper Hall (I978) demonstrated that the joint assumptions of the life cycle hypothesis, rational expectations and the constancy of the real rate of interest give rise to the startling
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