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Title: |
A Semiparametric Analysis of the Life
Cycle-Permanent Income Hypothesis |
| Author: |
Whang, Yoon-Jae |
| Author
Affiliation: |
Ewha U |
| Source: |
International Economic Journal, Winter 1993, v. 7, no. 4, pp. 89-107 |
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Publication Date: |
Winter 1993 |
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Abstract: |
This paper considers a semiparametric
regression model to test the various implications of the Life
Cycle-Permanent Income (LCP) hypothesis proposed by Hall (1978). The
semiparametric regression model does not require any parametric
assumption on the functional form of the unknown utility function in our
analysis. In contrast, the linear regression models frequently used in
the literature are justified under specific parametric forms of the
utility function and may lead to a misleading conclusion on the LCP
hypothesis if the parameterization is incorrect. Using both linear and
semiparametric regression models, tests of the martingale property of
consumption along with several specification tests are performed on the
U.S. quarterly data from 1947 to 1990. The results from the
semiparametric model do not differ significantly from those from the
linear model and suggest some evidences against the implications of the
LCP hypothesis. |
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