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The relationship between consumption and income
Author(s)
Date Issued
2016
Publisher
Istanbul : KSP Journals
Journal
Citation
Journal of Economics Library, 2016, vol. 3(1), pp. 94-99.
Description
Open access
This article was published in "Journal of Economics Library" in Vol. 3, Issue 1, p. 94-99.
This article was published in "Journal of Economics Library" in Vol. 3, Issue 1, p. 94-99.
Includes bibliographical references.
6 p.
Type
Peer Reviewed Journal Article
Abstract
Friedman (1957) states that permanent consumption is a function of permanent income in the long-run. Co-integration theory is first used to test whether a long-run equilibrium relation exists between the two variables. The existence of an error-correction form between two variables is necessary and sufficient for them to be cointegrated. We applied for an error-correction form to conform the linear long-run relationship between permanent income and permanent consumption under special conditions and the elasticity of permanent income in logarithms with respect to permanent consumption in logarithms is unity.
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T.Y.Hon_JEL2016v3n1.pdf
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