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

  title={Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence},
  author={Robert Ernest Hall},
  journal={Journal of Political Economy},
  pages={971 - 987}
  • R. Hall
  • Published 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… Expand
Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Evidence for the U.K. Economy
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Testing the stochastic implications of the life cycle-permanent income hypothesis using UK regional time-series data
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Seasonal Fluctuations and the Life Cycle-Permanent Income Model of Consumption
  • J. Miron
  • Economics
  • Journal of Political Economy
  • 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 theExpand
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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 andExpand
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 innovationsExpand


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Temporary Taxes and Consumer Spending." Mimeographed
  • Jerusalem: Inst. Advanced Studies,
  • 1977
, Jr . " Econometric Policy Evaluation : A Critique . " In
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