Household consumption function based on permanent income hypothesis: A systematic review

Wong, Sing Yun and Siti Hajar Samsu and Jain Yassin and Shairil Izwan Taasim and Faerozh Madli (2023) Household consumption function based on permanent income hypothesis: A systematic review. International Journal of Academic Research in Economics and Management Sciences, 12. pp. 392-403. ISSN 2226-3624

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Abstract

The Permanent Income Hypothesis was first proposed by Milton Friedman in the 1950s and has been an important theory in the field of macroeconomics. According to this theory, the spending behavior of individuals is based on their long-term average income rather than their current income. The theory posits that individuals adjust their spending patterns based on their expected lifetime income rather than temporary fluctuations in their income. Given the severe impact of COVID-19 on household consumption and income change, it becomes increasingly important to model household consumption. With this subject becoming increasingly significant, it is noteworthy to retrieve and report on the existing literature, especially within the context of explaining the Permanent Income Hypothesis (PIH) relevancy to model household consumption. This study will employ the PRISMA strategy in the systematic review of the existing literature. The finding from this review showed the literature found can be clustered into three (3) themes in answering the research questions and contributing to the existing body of knowledge in this domain. Finally, this systematic review will advance the literature and provide recommendations for policy formulation, as well as paving way for future studies within this context.

Item Type: Article
Keyword: Permanent Income Hypothesis, Household Consumption, Systematic Review, PRISMA, Literature
Subjects: H Social Sciences > HB Economic theory. Demography > HB1-3840 Economic theory. Demography > HB801-843 Consumption. Demand
H Social Sciences > HM Sociology (General) > HM(1)-1281 Sociology > HM481-554 Theory. Method. Relations to other subjects
Department: FACULTY > Faculty of Business, Economics and Accounting
Depositing User: SITI AZIZAH BINTI IDRIS -
Date Deposited: 03 Jul 2025 15:39
Last Modified: 03 Jul 2025 15:39
URI: https://eprints.ums.edu.my/id/eprint/44333

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