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PIH and ROT alternative in view of the intertemporal non-separability of preferences: empirical findings from a Japanese panel data

Author

Listed:
  • Yoshitsugu Kitazawa

    (Faculty of Economics, Kyushu Sangyo University)

  • Makoto Ohta

    (Waseda Graduate School of Finance, Accounting and Law)

Abstract

This paper describes an empirical investigation into the permanent income hypothesis (PIH) and the rule-of-thumb (ROT) alternative hypothesis, both of which allow for the intertemporal non-separability of preferences in the sense that past consumption of the PIH consumers has influence on their current utility. The data used in this study is a Japanese aggregate panel data processed with the Family Income and Expenditure Survey (FIES) for the period 1981-2002, and the GMM estimations for the panel data are carried out for spans within the period. The results demonstrate that the PIH holds for the bubble span 1988-1993 and the serious deflation span 1997-2002, while the ROT alternative holds for the post-bubble depression span 1993-1998.

Suggested Citation

  • Yoshitsugu Kitazawa & Makoto Ohta, 2005. "PIH and ROT alternative in view of the intertemporal non-separability of preferences: empirical findings from a Japanese panel data," Discussion Papers 25, Kyushu Sangyo University, Faculty of Economics.
    • Handle: RePEc:kyu:dpaper:25
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Permanent income hypothesis; Rule-of-thumb alternative hypothesis; Intertemporal non-separability of preferences; Panel data; Generalized method of moments;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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