Integrated Regressors and Tests of the Permanent Income Hypothesis
We use recent research on estimation and testing in the presence of unit roots to argue that Hall's (1978) t and F tests of whether consumption is predicted by lagged income, or by lags of consumption beyond the first, are asymptotically valid. A Monte Carlo experiment suggests that the asymptotic t and F distributions provide a good approximation to the actual finite sample distribution.
|Date of creation:||Sep 1988|
|Date of revision:|
|Publication status:||published as Stock, James H. and Kenneth D. West. "Integrated Regressors and Tests of the Permanent-Income Hypothesis." Journal of Monetary Economics, Vol. 21, No. 1, pp. 85-96, (January 1988)|
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