Has Financial Deregulation revived the Permanent Income/Life Cycle Hypothesis?

Nilss Olekalns (nilss@unimelb.edu.au)

No 564, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: The permanent income/life cycle hypothesis is tested using Australian data for periods covering the regulated and deregulated financial systems. The hypothesis is rejected for the entire sample period. Further investigation reveals that the rejection is confined to the period in which the financial system was regulated. The evidence points to liquidity constraints as being the cause of this rejection although the existence of myopic consumers may also be a possibility.

Keywords: STATISTICAL ANALYSIS; AUSTRALIA; INCOME; ECONOMIC MODELS (search for similar items in EconPapers)
JEL-codes: D31 (search for similar items in EconPapers)
Pages: 26 pages
Date: 1997
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Citations: View citations in EconPapers (10)

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