Empirical Test of the Rational Expectations-permanent Income Hypothesis: Abel and Mishkin’s General Approach: Evidence from Algeria

Tarek DJEDDI^1, , Tayeb LOUAFI² and Said BRIKA³

¹ENSSEA ex. INPS, Kolea, Algeria

²University of Larbi Tebessi, Tebessa, Algeria

³University of Laarbi ben Mhidi, Oum elbouaghi, Algeria

Cite this paper:
Tarek DJEDDI, Tayeb LOUAFI and Said BRIKA. Empirical Test of the Rational Expectations-permanent Income Hypothesis: Abel and Mishkin’s General Approach: Evidence from Algeria. International Journal of Econometrics and Financial Management. 2017; 5(2):33-36. doi: 10.12691/ijefm-5-2-2

Abstract

The purpose of this paper is to test through an empirical analysis the Rational Expectations-Permanent Income Hypothesis. To do this, we referred to the General approach of Abel and Mishkin (1983). Our econometric tests are based on annual data over the period [1985-2015] related to households in Algeria. Our results show the rejection of the general approach’s model which leads to the rejection of the Rational Expectations-Permanent Income Hypothesis. As finding, Algerian households do not form rational expectations about their future income.

Keywords:
rational expectations permanent Income consumption general approach Abel and Mishkin

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