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The Testing of Hall’s Permanent Income Hypothesis: A Case Study of Pakistan

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  • Khalid Khan

Abstract

The objective of this study is to test the Hall’s permanent income hypothesis for Pakistan using annual data from 1992 to 2010. The basic model of permanent income hypothesis (PIH) showed the validity of absolute income hypothesis (AIH) while the Campbell and Mankiw (1990) consumption model suggested that the proportion of forward looking consumers in total population is 32 percent and the remaining consumers are backward looking. Therefore in Pakistan, there is larger fluctuation in per capita income and small opportunity for consumption smoothing.

Suggested Citation

  • Khalid Khan, 2012. "The Testing of Hall’s Permanent Income Hypothesis: A Case Study of Pakistan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(4), pages 518-522.
    • Handle: RePEc:asi:aeafrj:v:2:y:2012:i:4:p:518-522:id:777
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    Cited by:

    1. Saima Liaqat & Khalid Khan & Po Bunnika, 2018. "China9apos9s Consumption Function: An Empirical Test of Absolute and Permanent Income Hypothesis," Global Economics Review, Humanity Only, vol. 3(1), pages 90-97, June.
    2. Tomas Havranek & Anna Sokolova, 2016. "Do Consumers Really Follow a Rule of Thumb? Three Thousand Estimates from 130 Studies Say "Probably Not"," Working Papers 2016/08, Czech National Bank.
    3. Bokana K.G & Kabongo W.N.S, 2018. "Modelling Real Private Consumption Expenditure in South Africa to Test the Absolute Income Hypothesis," Journal of Economics and Behavioral Studies, AMH International, vol. 10(5), pages 138-155.
    4. Hina, Hafsa, 2017. "Household Consumption Behavior in Pakistan under the Shadow of Personal Insecurity," MPRA Paper 77410, University Library of Munich, Germany.

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