Permanent Income Hypothesis, Myopia and Liquidity Constraints: A Case Study of Pakistan

Journal Title: Asian Economic and Financial Review - Year 2012, Vol 2, Issue 1

Abstract

This paper is an attempt to test the Permanent Income Hypothesis (PIH), Myopia and Liquidity Constraints as a case study for Pakistan. The paper also attempts to find out valid reasoning incase the PIH is rejected. Hall’s random walk model (1978) and Campbell and Mankiw model (1990) are used to test for the validity of PIH. The results reject the PIH and indicate the strong validity of Absolute Income Hypothesis (AIH) in Pakistan. Accordingly, Shea (1995) model is also used to validate the rejection of the PIH. The application of Shea (1995) model confirms the rejection; the symmetric relationship between consumption and expected income and provide a little evidence of existence of liquidity constraints

Authors and Affiliations

Khalid Khan| Lecturer Department of Economics, Lasbela University of Agriculture, Water and Marine Sciences, (LUAWMS), Uthal, Balochistan, Hazrat Yousaf| Lecturer Department of Economics, Lasbela University of Agriculture, Water and Marine Sciences, (LUAWMS), Uthal, Balochistan, Muhammed Ghazanfar Abbas| Lecturer Department of Economics, Lasbela University of Agriculture, Water and Marine Sciences, (LUAWMS), Uthal, Balochistan, Manzoor H Memon ChE| Chartered Economist, Senior Manager, JCR-VIS Credit Rating Co. Limited, Mohammed Nishat| Professor Department of Finance and Economics, Institute of Business Administration (IBA), Karachi

Keywords

Related Articles

CORPORATE BOARD DIVERSITY AND FINANCIAL PERFORMANCE OF INSURANCE COMPANIES IN NIGERIA: AN APPLICATION OF PANEL DATA APPROACH

The major objective of this study is to investigate the relationship between board diversity and financial performance of insurance companies in Nigeria, with specific reference to how gender diversity, ethnic diversity,...

Driving Forces of Globalization in Emerging Market Economies Developing Countries

The paper will deal mainly with the macroeconomics of globalization (trade andfinance), but before proceeding, a final distinction needs to be drawn betweenglobalization and liberalization. Developing countries themselve...

COULD ZHOU XIAOCHUAN PUT OPTION SAVE CHINA’S CAPITAL MARKET?

This article proposes a new framework to analyze the impact of monetary policy on asset price. Based on the Sign-Restriction Approach proposed by Uhlig (2005) some orthogonal restrictions are imposed to filter out the in...

AN ANALYSIS FOR CREDIT RATING AND MOMENTUM STRATEGY

In recent years, investors are increasingly concerned about whether the credit risk will affect the return on investment. This paper discusses the credit rating and momentum investment strategy relationship. The research...

ECONOMIES OF SCALE AND ALLOCATIVE EFFICIENCY OF RICE FARMING AT WEST SERAM REGENCY, MALUKU PROVINCE, INDONESIA

Economies of scale and allocative efficiency of rice farming has been conducted in technical irrigated field at Kabupaten Seram Bagian Barat – SBB (West Seram Regency), Province of Maluku. This study has the objectives t...

Download PDF file
  • EP ID EP1753
  • DOI -
  • Views 588
  • Downloads 38

How To Cite

Khalid Khan, Hazrat Yousaf, Muhammed Ghazanfar Abbas, Manzoor H Memon ChE, Mohammed Nishat (2012). Permanent Income Hypothesis, Myopia and Liquidity Constraints: A Case Study of Pakistan. Asian Economic and Financial Review, 2(1), 155-162. https://europub.co.uk/articles/-A-1753