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Empirical Analysis of Rational Expectation and Permanent Income Hypothesis in Lagos State, Nigeria
Abiodun Musbaudeen1, Daniel Barkley2* and Jing Wang2
1Economics On The Move (EOTM), United States
2Xiamen University, China
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Abstract:
This study empirically analyses the rational expectation and permanent income hypothesis (PIH) in Lagos State, Nigeria using the ordinary least square method to estimate the long-run relationship and parsimonious error correction model to estimate short-run impacts. Our findings show that permanent income influences permanent monthly consumption in the short and long run but permanent monthly income does not impact temporary monthly consumption both in the short and long run. Financial regulation may be necessary to prevent a significant fall in the value of the portfolio of asset holdings by Lagos residents.
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Keywords: Rational Expectation, Consumption, Permanent Income Hypothesis, Parsimonious Error Correction, Lagos State, Lagos Consumption Pattern, Lagos Resident
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Received:N/A; Revised:N/A; Accepted:N/A; Published:December 30, 2021
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*Corresponding author; e-mail: Barkley@xujc.com
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Citation:Musbaudeen, A., & Barkley, D., & Wang, J.(2021). Empirical Analysis of Rational Expectation and Permanent Income Hypothesis in Lagos State, Nigeria. International Journal of Business Studies and Innovation, 1(2), 84-93. https://doi.org/10.35745/ijbsi2021v01.02.0010
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Copyright: ©
2021
The Author(s). Published with license by IIKII, Singapore. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (CC BY), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
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