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Has Financial Deregulation Revived the Permanent Income/Life Cycle Hypothesis?
Author(s) -
Olekalns Nilss
Publication year - 1997
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.00014
Subject(s) - life cycle hypothesis , deregulation , permanent income hypothesis , sample (material) , market liquidity , economics , monetary economics , macroeconomics , chemistry , chromatography
The permanent income/life cycle hypothesis is tested using Australian data for periods covering the regulated and deregulated financial systems. The hypothesis is rejected for the entire sample period. Further investigation reveals that the rejection is confined to the period in which the financial system was regulated. The evidence points to liquidity constraints as being the cause of this rejection although the existence of myopic consumers may also be a possibility.