The Relationship Between Consumption and Income

Tai-Yuen Hon ()
Additional contact information
Tai-Yuen Hon: Hong Kong Shue Yan University, China.

Journal of Economics Library, 2016, vol. 3, issue 1, 94-99

Abstract: Friedman (1957) states that permanent consumption is a function of permanent income in the long-run. Co-integration theory is first used to test whether a long-run equilibrium relation exists between the two variables. The existence of an error-correction form between two variables is necessary and sufficient for them to be cointegrated. We applied for an error-correction form to conform the linear long-run relationship between permanent income and permanent consumption under special conditions and the elasticity of permanent income in logarithms with respect to permanent consumption in logarithms is unity.

Keywords: Permanent Consumption; Permanent Income; Co-Integration; Error Correction. (search for similar items in EconPapers)
JEL-codes: C00 C10 C20 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.kspjournals.org/index.php/JEL/article/download/603/741 (application/pdf)
http://www.kspjournals.org/index.php/JEL/article/view/603 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ksp:journ5:v:3:y:2016:i:1:p:94-99

Access Statistics for this article

Journal of Economics Library is currently edited by Bilal KARGI

More articles in Journal of Economics Library from KSP Journals Istanbul, Turkey.
Bibliographic data for series maintained by Bilal KARGI ( this e-mail address is bad, please contact ).