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Estimating Expenditure Pattern and Permanent Income Hypothesis: Evidence from Kelantan Malaysia

Author

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  • Mohd Ali, Ahmad Fahme

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

  • Mohd Radzi, Naziatul Aziah

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

  • Kosnin, Ruzanifah

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

  • Hassan, Suchi

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

  • Saidin, Siti Salina

    (Faculty of Hospitality, Tourism and Wellness Universiti Malaysia Kelantan Kampus Kota, Karung Berkunci 36, Taman Bendahara, 16100 Pengkalan Chepa, Kelantan MALAYSIA)

Abstract

The purpose of this paper is to investigate the consumption function among households in Kelantan Malaysia based on the Permanent Income Hypothesis (PIH). This study used secondary data obtained from annual reports, as well as from published and non-published data between 2000 and 2016. The ARDL bound testing approach to deal with cointegration was applied to estimate the long run correlation between the variables. Meanwhile, the error correction method (ECM) was used to determine any short run correlation. This study found a large disparity between the elasticity to consume from current income and the elasticity to consume from permanent income among households in Kelantan. Therefore, it can be concluded that in the case of Kelantan, the PIH is valid.

Suggested Citation

  • Mohd Ali, Ahmad Fahme & Mohd Radzi, Naziatul Aziah & Kosnin, Ruzanifah & Hassan, Suchi & Saidin, Siti Salina, 2021. "Estimating Expenditure Pattern and Permanent Income Hypothesis: Evidence from Kelantan Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(2), pages 39-49.
    • Handle: RePEc:ukm:jlekon:v:55:y:2021:i:2:p:39-49
    DOI: http://dx.doi.org/10.17576/JEM-2021-5502-4
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    References listed on IDEAS

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    1. Magda Kandil & Ida Mirzaie, 2006. "Consumption and macroeconomic policies: Theory and evidence from developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(4), pages 469-491.
    2. Joseph DeJuan & John Seater & Tony Wirjanto, 2006. "Testing the permanent-income hypothesis: new evidence from West-German states ( Länder)," Empirical Economics, Springer, vol. 31(3), pages 613-629, September.
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    6. Tey Yeong Sheng & Mad Nasir Shamsudin & Zainal Abidin Mohamed & Amin Mahir Abdullah & Alias Radam, 2008. "Food Consumption Behavior Of The Malays In Malaysia," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 16(2), pages 209-219, December.
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    Cited by:

    1. Wong Sing Yun & Suddin Lada & Siti Hajar Samsu & Sri Indah Nikensari & Jain Yassin, 2025. "Household consumption function under permanent income hypothesis: A bibliometric analysis using R," SN Business & Economics, Springer, vol. 5(12), pages 1-19, December.

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    JEL classification:

    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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