Was the increase in income inequality in the US due to permanent shocks or merely to an increase in the variance of transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX repeated cross-section data on consumption and income to...

Is it possible to forecast using poorly measured data? According to the permanent income hypothesis, a low personal saving rate should predict rising future income (Campbell, 1987). However, the U.S. personal saving rate is initially poorly measured and has been repeatedly revised upward in...

Milton Friedman's permanent income hypothesis implies that data on savings help forecast future income growth. An econometric model that exploits this implication predicts that the U.S. economy will continue to expand in 1995