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Testing the Predictability of Consumption Growth: Evidence from China

Liping Gao () and Hyeongwoo Kim ()

No auwp2014-11, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: Chow (1985, 2010, 2011) reports indirect evidence for the permanent income hypothesis using time series observations in China. We revisit this issue by addressing direct evidence of the predictability of consumption growth in China during the post-economic reform regime (1978-2009) as well as the postwar US data for comparison. Our in-sample analysis provides strong evidence against the PIH for both countries. Out-of-sample forecast exercises show that consumption changes are highly predictable.

Keywords: Permanent Income Hypothesis; Consumption; Out-of-Sample Predictability; Diebold-Mariano-West Statistic (search for similar items in EconPapers)
JEL-codes: E21 E27 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-cna, nep-for, nep-mac and nep-tra
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Related works:
Journal Article: TESTING THE PREDICTABILITY OF CONSUMPTION GROWTH: EVIDENCE FROM CHINA (2016) Downloads
Working Paper: Testing the Predictability of Consumption Growth: Evidence from China (2016) Downloads
Working Paper: Testing the Predictability of Consumption Growth: Evidence from China (2015) Downloads
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