Testing the Permanent Income Hypothesis: The Evidence from Canadian Data

Abstract

This paper investigates whether there are variants of the permanent income model that are consistent with seasonally unadjusted quarterly postwar Canadian data. The analysis is based on a misspecification-test equation which nests the standard permanent income model. The results obtained are somewhat unfavourable to the permanent-income hypothesis. The same results also apply to more general models in which the real interest rate is time- varying and the utility function is non-separable in consumption and the stock of durable goods. Un test de l'hypothese du revenu permanent: resultats derives a partir des donnees cana- diennes. Ce memoire presente les resultats d'une enquete pour etablir s'il existe un ou des variantes du modele du revenu permanent qui soient compatibles avec les donnees trimestrielles canadiennes non-desaisonnalisees pour la periode de l'apres Seconde Guerre Mondiale. L'analyse est fondee sur une equation qui encastre le modele de revenu perma- nent standard mais qui est enrichie pour tester la specification de l'6equation. Les resultats obtenus sont quelque peu defavorables 'a l'hypothese du revenu permanent. Les memes resultats s'appliquent aussi 'a des modeles plus generaux dans lesquels le taux d'interet reel

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