Macroeconomic model reference
Permanent Income Hypothesis Model
Friedman's Permanent Income Hypothesis: consumption depends on permanent income, not current income. C = k * Y_P, where permanent income Y_P is an adaptive-expectations weighted average of current and past income.
Theory-based models · Derivation
Permanent Income Hypothesis derivation: assumptions and equations
Trace the Permanent Income Hypothesis derivation through assumptions, notation, equations, and failure cases.