Mismeasured personal saving and the permanent income hypothesis
Is 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.
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References listed on IDEAS
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- Campbell, John Y, 1987.
"Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis,"
Econometric Society, vol. 55(6), pages 1249-1273, November.
- John Y. Campbell, 1986. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," NBER Working Papers 1805, National Bureau of Economic Research, Inc.
- S. Boragan Aruoba, 2008. "Data Revisions Are Not Well Behaved," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 319-340, 03.
- Aruoba, Boragan, 2005. "Data Revisions Are Not Well-Behaved," CEPR Discussion Papers 5271, C.E.P.R. Discussion Papers.
- Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
- Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia.
- 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.
- Graham Elliott & Allan Timmermann, 2016. "Economic Forecasting," Economics Books, Princeton University Press, edition 1, number 10740, June.
- Graham Elliott & Allan Timmermann, 2008. "Economic Forecasting," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 3-56, March.
- Elliott, Graham & Timmermann, Allan G, 2007. "Economic Forecasting," CEPR Discussion Papers 6158, C.E.P.R. Discussion Papers.
- 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.
- Michael J. Boskin, 2000. "Economic Measurement: Progress and Challenges," American Economic Review, American Economic Association, vol. 90(2), pages 247-252, May.
- Croushore, Dean, 2006. "Forecasting with Real-Time Macroeconomic Data," Handbook of Economic Forecasting, Elsevier. Full references (including those not matched with items on IDEAS)
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