Maximum-Likelihood Estimation using a Variance-Covariance Relationship of Stochastic elements within a panel

패널내 추계적 요인들의 공분산 관계에 의한 최우추정

This paper analyses the stochastic nature of the Permanent Income Hypothesis (PIH) by specifying the variance-covariance structure of PIH based on Hall and Mishkin[3]. Maximum likelihood is employed to estimate the model by explicitely incorporating the heteroscedastic nature of the data into the likelihood. The data used are individual Korean household consumption and income data. The results indicate that the data are generally consistent with the Permanent Income Hypothesis, and about 11 percent of the total variation in consumption may be attributable to the excess sensitivity of consumption to income.