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The Testing of Hall's Permanent Income Hypothesis: A Case Study of Iran

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  • Gudarzi Farahani Yazdan
  • Merabirad Sina

Abstract

The objective of this study is to test the Hall’s permanent income hypothesis for Iran using cointegration and error correction model from annual data covering the period of 1980-2010 using annual data from 1980 to 2010. The basic model of permanent income hypothesis showed the validity of absolute income hypothesis while the Campbell and Mankiw (1990) consumption model suggested that the proportion of forward looking consumers in total population is 34 percent and the remaining consumers are backward looking. Therefore in Iran, there is larger fluctuation in per capita income and small opportunity for consumption smoothing.

Suggested Citation

  • Gudarzi Farahani Yazdan & Merabirad Sina, 2013. "The Testing of Hall's Permanent Income Hypothesis: A Case Study of Iran," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(3), pages 311-318.
    • Handle: RePEc:asi:aeafrj:v:3:y:2013:i:3:p:311-318:id:994
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    Cited by:

    1. Mowlaei , Mohammad & Intezar , Aburaihan, 2019. "The Effects of Social Characteristics of Iranian Households on Food Consumption Expenditures," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 14(4), pages 555-572, October.

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