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 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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  • Economics
  • Journal of Political Economy
  • 1986
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