Testing the Predictability of Consumption Growth: Evidence from China
Liping Gao () and
Hyeongwoo Kim ()
No auwp2015-19, Auburn Economics Working Paper Series from Department of Economics, Auburn University
Chow (1985, 2010, 2011) reports indirect evidence in favor of the permanent income hypothesis using time series observations in China. We revisit this issue by evaluating direct measures 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, which sharply contrasts the implication of Chow (1985, 2010, 2011).
Keywords: Permanent Income Hypothesis; Consumption; Diebold-Mariano-West Statistic (search for similar items in EconPapers)
JEL-codes: E21 E27 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-for, nep-mac and nep-tra
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Journal Article: TESTING THE PREDICTABILITY OF CONSUMPTION GROWTH: EVIDENCE FROM CHINA (2016)
Working Paper: Testing the Predictability of Consumption Growth: Evidence from China (2016)
Working Paper: Testing the Predictability of Consumption Growth: Evidence from China (2014)
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