HYPOTHESIS TEST ON HALL PERMANENT INCOME (HPI): THE CASE OF INDONESIA

Maryatmo , R. (2010) HYPOTHESIS TEST ON HALL PERMANENT INCOME (HPI): THE CASE OF INDONESIA. Journal of Indonesian Economy and Business, 25 (3). pp. 1-16. ISSN 2085-8272

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Abstract

ABSTRACT This paper is focused on the test of Hall Permanent Hypothesis. Hall hypothesizes that ic agents have pe1ject information on their Life time income. Since economic agents perfect information on their Life time income, they tend to hold their inter-temporal ption to be equal. There are three ways to test the Hall hypothesis. The three ways ckey Fuller, Augmented Dickey Fuller, Cambell and Mankiw tests. The results are istent each others. The finding tends to support that the interest rate transmission nism for inter-temporal consumption is not working in Indonesia. The interest rate onesia tends to be higher than of the neighboring countries. The interest rate in sia tends to be high because of the high inflation rate, and inefficient banking e. It is interesting to plan further research on staggering high inflation and ent banking practice in Indonesia.

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