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Has Financial Deregulation revived the Permanent Income/Life Cycle Hypothesis?


  • Olekalns, N


The permanent income/life cycle hypothesis is tested using Australian data for periods covering the regulated and deregulated financial systems. The hypothesis is rejected for the entire sample period. Further investigation reveals that the rejection is confined to the period in which the financial system was regulated. The evidence points to liquidity constraints as being the cause of this rejection although the existence of myopic consumers may also be a possibility.

Suggested Citation

  • Olekalns, N, 1997. "Has Financial Deregulation revived the Permanent Income/Life Cycle Hypothesis?," Department of Economics - Working Papers Series 564, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:564

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    Cited by:

    1. Messinis, George & Henry, Olan & Olekalns, Nilss, 2002. "Rational habit modification in consumption," Economic Modelling, Elsevier, vol. 19(4), pages 665-678, August.
    2. Glenn Otto, 2003. "Can an Intertemporal Model Explain Australia's Current Account Deficit?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(3), pages 350-359.
    3. Sinclair Davidson & Ashton de Silva, 2013. "Stimulating Savings: An Analysis of Cash Handouts in Australia and the United States," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 20(2), pages 39-60.
    4. Gianni La Cava & John Simon, 2003. "A Tale of Two Surveys: Household Debt and Financial Constraints in Australia," RBA Research Discussion Papers rdp2003-08, Reserve Bank of Australia.
    5. Ramesh Durbarry, 2004. "Foreign aid: is it all consumed?," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(2), pages 189-199.
    6. Alvin Tan & Graham Voss, 2000. "Consumption and Wealth," RBA Research Discussion Papers rdp2000-09, Reserve Bank of Australia.
    7. Henry, O. & Messinis, G. & Olekalns, N., 1999. "Rational Habit Modification: the Role of Credit," Department of Economics - Working Papers Series 729, The University of Melbourne.

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution


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