The life-cycle hypothesis under rational expectations

Johnson, Paul Arden. (1981). The life-cycle hypothesis under rational expectations Honours Thesis, School of Economics, University of Queensland.

       
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Author Johnson, Paul Arden.
Thesis Title The life-cycle hypothesis under rational expectations
School, Centre or Institute School of Economics
Institution University of Queensland
Publication date 1981
Thesis type Honours Thesis
Total pages 101
Language eng
Subjects 14 Economics
Formatted abstract       This thesis examines the Rational Expectations – Life Cycle hypothesis as originally expounded by Robert Hall. He showed that if agents act to maximize the expected lifetime utility of their consumption, then the marginal utility of consumption follows a sub-martingale. On certain assumptions, aggregate consumption, Ct, is then also a sub-martingale with respect to any lagged information set øt-1 such that Ct-1 < øt-1. Hall found that this hypothesis is, on the whole, supported by post-war United States data. The hypothesis is tested here for the first time on (post-war) Australian data, for various øt-1 and can only be rejected (and marginally at that) if øt-1 contains a particular measure of income or real per capita liquid assets. The evidence is, however, entirely consistent with a slightly modified form of the hypothesis.

 
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Created: Wed, 24 Nov 2010, 11:11:02 EST by Muhammad Noman Ali on behalf of The University of Queensland Library