Work

Permanent Income Hypothesis, Myopia and Liquidity Constraints: A Case Study of Pakistan

Year: 2011

Type: article

Abstract: In this paper, it is attempted to test the permanent income hypothesis(PIH) for Pakistan. If the PIH is not valid for Pakistan the study alsoattempts to find out the reasons for rejection of PIH. Hall’s randomwalk model (1978) and Campbell and Mankiw model (1990) are usedto test for the validity of PIH. The results of this study indicate thestrong validity of absolute income hypothesis (AIH) rather than PIH.Therefore, to find out the reasons for the rejection of the PIH inPakistan we used Shea (1995) model. The results of the Shea (1995)model rejected the symmetric relationship between consumption andexpected income and provide a little evidence of existence of liquidityconstraints.

Source: Pakistan Journal of Social Sciences

Authors: Khalid Khan, Hazrat Yousaf, Muhammed Ghazanfar Abbas, Manzoor Hussain Memon, Mohammed Nishat

Institutions: Lasbela University of Agriculture Water and Marine Science, Institute of Business Administration Karachi

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: No poverty

Open Access status: diamond

OpenAlex ID: W1586523876

FWCI: 0.853

Cites: 14

Cited by: 15

Related to: 10