Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245235 
Authors: 
Year of Publication: 
2019
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 7 [Issue:] 1 [Publisher:] Taylor & Francis [Place:] Abingdon [Year:] 2019 [Pages:] 1-10
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
In this paper, we estimate the behavior of private consumption in Cote d'Ivoire under the permanent income hypothesis using annual data for the period 1970-2016. The first objective is to test the validity of the permanent income hypothesis in Cote d'Ivoire. Our second concern is to investigate the reason explaining the rejection of this hypothesis. The data consists of real household consumption, real gross domestic product, and the real interest rate on deposits. The empirical analysis uses the nonlinear autoregressive distributed lag (NARDL) model proposed by Shin et al. This approach allows us to simultaneously test the short and long run nonlinearities through positive and negative partial sum decompositions of income. The results suggest that the absolute income hypothesis is valid rather than permanent income hypothesis. Also, there is evidence pointing to the rejection of the permanent income hypothesis-driven by the presence of liquidity constraints rather than myopia. As policy implications, the lending conditions of banks should be relaxed to increase the accessibility of households to credits. In addition, private consumption can be increased through income or consumption tax reductions.
Subjects: 
consumption function
permanent income hypothesis
absolute income hypothesis
liquidity constraints
Cote d&#x2019
Ivoire
JEL: 
C22
C51
D12
E21
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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