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Testing Permanent Income Hypothesis for Fiji

B. Rao

Macroeconomics from University Library of Munich, Germany

Abstract: Hall $(1978)$ has stimulated considerable controversy and empirical work on testing the validity of the permanent income hypothesis $(PIH)$. Much of this work is on the developed countries. In the developing countries incomes show larger fluctuations and for the majority opportunities for inter-temporal substitution are limited. This paper uses the extended framework of Campbell and Mankiw (1989) and finds that current consumption is determined by current income for more than two thirds of the consumers in Fiji.

Keywords: Consumption function; Developing countries; Fiji; Permanent income hypothesis; Hall's random walk hypothesis; Campbell-Mankiw tests. (search for similar items in EconPapers)
JEL-codes: C1 C5 (search for similar items in EconPapers)
Date: 2005-11-11
New Economics Papers: this item is included in nep-sea
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