Corbea, Dean; Ouliaris, Sam; Phillips, Peter C.B. - Cowles Foundation for Research in Economics, Yale University - 1991
This paper reexamines the permanent income hypothesis (PIH) in the frequency domain. Using a simple model, we demonstrate that the PIH implies the marginal propensity to consume (MPC) out of zero frequency income is unity. The PIH also implies that the MPC out of transitory (or high frequency)...