Three Essays in Time-series Macroeconomics

Download or read book Three Essays in Time-series Macroeconomics written by Junichiro Ishida and published by . This book was released on 2000 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: The second chapter of the thesis considers the negative correlation between inflation and the average propensity to consume in the U.S. economy. While many explanations are offered for this observation, it is hard to be reconciled within the framework of a rational expectations model. In this paper, however, we argue that this correlation can be derived as an implication of the permanent income hypothesis. This conjecture is tested by identifying the dynamic response of consumption to different types of shock. The data show that this interpretation is largely consistent. This procedure also allows us to identify transitory consumption and the source of the failure of the permanent income hypothesis.