Mismeasured personal saving and the permanent income hypothesis
AbstractIs it possible to forecast using poorly measured data? According to the permanent income hypothesis, a low personal saving rate should predict rising future income (Campbell, 1987). However, the U.S. personal saving rate is initially poorly measured and has been repeatedly revised upward in benchmark revisions. The authors use both conventional and real-time estimates of the personal saving rate in vector autoregressions to forecast real disposable income; using the level of the personal saving rate in real time would have almost invariably made forecasts worse, but first differences of the personal saving rate are predictive. They also test the lay hypothesis that a low personal saving rate has implications for consumption growth and find no evidence of forecasting ability.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 07-8.
Date of creation: 2007
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-31 (All new papers)
- NEP-FOR-2007-03-31 (Forecasting)
- NEP-MAC-2007-03-31 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Graham Elliott & Allan Timmermann, 2008.
Journal of Economic Literature,
American Economic Association, vol. 46(1), pages 3-56, March.
- Rosanne Cole, 1969. "Data Errors and Forecasting Accuracy," NBER Chapters, in: Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance, pages 47-82 National Bureau of Economic Research, Inc.
- Aruoba, Boragan, 2005.
"Data Revisions Are Not Well-Behaved,"
CEPR Discussion Papers
5271, C.E.P.R. Discussion Papers.
- Dean Croushore & Tom Stark, 1999.
"A real-time data set for macroeconomists,"
99-4, Federal Reserve Bank of Philadelphia.
- John Y. Campbell, 1988.
"Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis,"
NBER Working Papers
1805, National Bureau of Economic Research, Inc.
- Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, vol. 55(6), pages 1249-73, November.
- Michael J. Boskin, 2000. "Economic Measurement: Progress and Challenges," American Economic Review, American Economic Association, vol. 90(2), pages 247-252, May.
- Dean Croushore & Tom Stark, 2003.
"A Real-Time Data Set for Macroeconomists: Does the Data Vintage Matter?,"
The Review of Economics and Statistics,
MIT Press, vol. 85(3), pages 605-617, August.
- Dean Croushore & Tom Stark, 1999. "A real-time data set for marcoeconomists: does the data vintage matter?," Working Papers 99-21, Federal Reserve Bank of Philadelphia.
- Croushore, Dean, 2006. "Forecasting with Real-Time Macroeconomic Data," Handbook of Economic Forecasting, Elsevier.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Beth Paul).
If references are entirely missing, you can add them using this form.