This paper utilizes relatively unexplored Canadian provincial-level data to investigate an old but still relevant question in macroeconomics as to whether consumption responds to income innovations in a manner consistent with the stochastic implications of the permanent income hypothesis (PIH)....

This paper tests the prediction of the Permanent Income Hypothesis (PIH) that news about future income induce a revision in consumption equal to the revision in permanent income. We use time-series data from 48 contiguous US states to perform the test. The empirical results provide some support...

Friedman's Permanent Income Hypothesis (PIH) predicts that the income elasticity of consumption should be higher for households for which a large fraction of the variation of their income is permanent than for households facing more transitory variations in income. We test this prediction using...

Data quality in the Penn World Tables varies systematically across countries that have different growth rates and are at different stages of economic development, thus introducing measurement error correlated with variables of economic interest. We explore this problem with three examples from...

D EJUAN J. (2003) The response of consumption to income innovations: evidence from UK regions, Reg. Studies 37 , 445-451. The permanent income hypothesis (PIH) predicts an income innovation has the same size effect on consumption as on permanent income. This paper tests this prediction using...

This study examines the relationship between business-cycle volatility and economic growth using data from 10 Canadian provinces over the 1961-2000 period. Test results based on cross-section and panel data estimation indicate, at best, a weak positive volatility-growth relationship.

We use modern household data and econometric methods to conduct some of the original tests of the Permanent Income Hypothesis (PIH) suggested and used by Friedman (1957). The data and methods are superior to those available to Friedman, allowing us to refine Friedman’s tests and perform tests...