Journal of Undergraduate Research
Keywords
borrowing constraints, Life Cycle/Permanent Income Hypothesis, LC/PIH
College
Family, Home, and Social Sciences
Department
Economics
Abstract
Although the theory of aggregate consumption was first addressed in 1936 by Keynes, the modern theory stems from work done in the mid 1950’s by Modigliani and Brumberg (1954) and Friedman (1957); their theory has been termed the Life Cycle/Permanent Income Hypothesis (LC/PIH). While Keynes proposed that, “the amount of aggregate consumption mainly depends on the amount of aggregate income,” 1 the modern theory proposes that consumption tracks “permanent,” or average lifetime, income rather than current income.
Recommended Citation
Cardon, James and Kirwan, Dr. Barrett E.
(2014)
"“Borrowing” Constraints: a Panel Study,"
Journal of Undergraduate Research: Vol. 2014:
Iss.
1, Article 185.
Available at:
https://scholarsarchive.byu.edu/jur/vol2014/iss1/185