Friedman’s book on the consumption function is one of the great works of Economics demonstrating how the interplay between theoretical ideas and data analysis can lead to major policy implications. We present a short review of Friedman\\\'s permanent income hypothesis, the origins of the idea and its theoretical foundations. We give a brief overview of its influence in modern economics and discuss some relevant empirical results and the way they relate to the original approach taken by Friedman.
Authors
Costas Meghir
Costas is a Research Fellow of the IFS and a Professor of Economics at Yale University and a Visiting Professor at University College London.
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