The Deaton paradox in a long memory context with structural breaks

Luis Gil-Alana, Antonio Moreno (antmoreno@unav.es) and Seonghoon Cho

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Abstract: This paper contributes to the permanent income hypothesis (PIH) and excess consumption smoothness debate in the context of fractional integration. We show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in the empirical work. In fact, the I(1) hypothesis is rejected for the income process with monthly data in favor of a fractional integration order lower than 1. Moreover, if a structural break is taken into account, we observe a substantial reduction in the degree of consumption smoothness, especially after the break found in 1975.

Keywords: Social; Sciences; &; Humanities (search for similar items in EconPapers)
Date: 2011-06-25
Note: View the original document on HAL open archive server: https://hal.science/hal-00711450
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Published in Applied Economics, 2011, pp.1. ⟨10.1080/00036846.2011.572857⟩

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Related works:
Journal Article: The Deaton paradox in a long memory context with structural breaks (2012)
Working Paper: The Deaton paradox in a long memory context with structural breaks (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00711450

DOI: 10.1080/00036846.2011.572857

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