Trends, random walks, and tests of the permanent income hypothesis
Recent studies find that consumption is excessively sensitive to income. These studies assume that income is stationary around a deterministic trend. The data, however, do not reject the hypothesis that disposable income is a random walk with drift. If income is indeed a random walk, then the standard testing procedure is greatly biased toward finding excess sensitivity. Moreover, if income is borderline stationary, this procedure is also seriously biased.
(This abstract was borrowed from another version of this item.)
When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:16:y:1985:i:2:p:165-174. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.