Abstract:International audienceThis paper contributes to the permanent income hypothesis (PIH) and excess consumption smoothness debate in the context of fractional integration. We show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in the empirical work. In fact, the I(1) hypothesis is rejected for the income process with monthly data in favor of a fractional integration order lower than 1. Moreover, if a structural break is taken into account, we obser… Show more
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