Trends, random walks, and tests of the permanent income hypothesis
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The authors showed that if income follows either a more general non-stationary process or a borderline stationary process, then the standard testing procedure is greatly biased toward finding excess sensitivity to income.About:
This article is published in Journal of Monetary Economics.The article was published on 1985-09-01 and is currently open access. It has received 168 citations till now. The article focuses on the topics: Permanent income hypothesis & Personal income.read more
Citations
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Cointegration and Tests of Present Value Models
TL;DR: In this paper, the authors proposed a cointegrated model where a variable Y[sub t] is proportional to the present value, with constant discount rate, of expected future values of a variable y[subt] and the "spread" S [sub t]= Y[Sub t] -[theta sub t] will be stationary for some [theta] whether or not y(sub t) must be differenced to induce stationarity.
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Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence
TL;DR: This paper argued that the time-series data on consumption, income, and interest rates are best viewed as generated not by a single representative consumer but by two groups of consumers: half the consumers are forward-looking and consume their permanent income, but are extremely reluctant to substitute consumption temporarily.
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Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots
John Y. Campbell,Pierre Perron +1 more
TL;DR: In this article, an introduction to unit root econometrics as applied in macroeconomics is presented, emphasizing the importance of correctly specifying deterministic components of the series and the usefulness of unit root tests not as methods to uncover some -true relation" but as practical devices that can be used to impose reasonable restrictions on the data and to suggest what asymptotic distribution theory gives the best approximation to the finite-sample distribution of coefficient estimates and test statistics.
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Alternative explanations of the money-income correlation
TL;DR: In this article, an empirical comparison of the standard explanation of the bivariate correlation of money and income with two alternatives, the credit view, which focuses on financial market imperfections rather than real-nominal confusion, was made.
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Univariate detrending methods with stochastic trends
TL;DR: In this paper, the authors discuss detrending economic time series, when the trend is modelled as a stochastic process and apply it to three time series: GNP, disposable income, and consumption expenditures.
References
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Likelihood ratio statistics for autoregressive time series with a unit root
David A. Dickey,Wayne A. Fuller +1 more
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Time Series Analysis: Forecasting and Control
TL;DR: Time Series Analysis and Forecasting: principles and practice as mentioned in this paper The Oxford Handbook of Quantitative Methods, Vol. 3, No. 2: Statistical AnalysisTime-Series ForecastingPractical Time-Series AnalysisApplied Bayesian Forecasting and Time Series AnalysisSAS for Forecasting Time SeriesApplied Time Series analysisTime Series analysisElements of Nonlinear Time Series analyses and forecastingTime series analysis and forecasting by Example.
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Trends and random walks in macroeconmic time series: Some evidence and implications
TL;DR: In this paper, the authors investigate whether macroeconomic time series are better characterized as stationary fluctuations around a deterministic trend or as non-stationary processes that have no tendency to return to the deterministic path, and conclude that macroeconomic models that focus on monetary disturbances as a source of purely transitory fluctuations may not be successful in explaining a large fraction of output variation.
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Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence
Robert E. Hall,Robert E. Hall +1 more
TL;DR: In this paper, the marginal utility of consumption evolves according to a random walk with trend, and consumption itself should evolve in the same way, and the evidence supports a modified version of the life cycle permanent income hypothesis.
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Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence
TL;DR: In this article, the authors show that no variable apart from current consumption should be of any value in predicting future consumption, except real disposable income, which has no predictive power for consumption, but rejected for an index of stock prices.
Related Papers (5)
Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence
Distribution of the Estimators for Autoregressive Time Series with a Unit Root
David A. Dickey,Wayne A. Fuller +1 more