Testing the permanent income hypothesis using unit root quantile autoregression tests

In this article the covariate quantile autoregression approach was used to test whether consumption is a constant unit root process, as predicted by the Permanent Income Hypothesis (PIH). The evidence suggests that at low quantiles of the conditional quantile function of consumption the persistence of shocks are lower than that predicted by the PIH. This asymmetry is consistent with credit constraints and/or buffer-stock savings.