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The present study aims to evaluate the aggregate consumption function from the perspective of the Euler equation using Indian macroeconomic data. Further, to examine the robustness of the findings for India, other developing nations are also studied.

Quarterly time-series data from 1996:1 to 2020:3 on consumption and income in India are used to evaluate the alternative model proposed by Campbell and Mankiw (1989). The alternative hypotheses in the present study are tested by estimating models using the instrumental variable approach. The lagged changes in the quarterly average of 91-day Treasury bill yields are used as the nominal interest rate instrumental variables along with other lagged instrumental variables.

The evidence presented in this study suggests that aggregate consumption is better explained when the permanent income model incorporates rule-of-thumb consumers, that is, individuals who consume their current income along with those who consume their permanent income.

The new rule-of-thumb framework better explains some of the observed phenomena, such as why the expected changes in consumption are related to the expected changes in income, why the expected changes in consumption are unrelated to real interest rates (i.e. why the intertemporal elasticity of substitution is near zero) and why a high consumption/income ratio is usually followed by an increase in income growth.

This study adds to the limited literature on the Euler-based consumption function in developing economies.

A growing number of Muslim countries are expressing the desire, and even in some cases taking serious actions, to turn to strict Islamic laws and teachings in modelling their way of life including their economic behaviour. It is the purpose of this paper to investigate the economic implications of these laws i.e. the teachings of the Holy Qur'an, the traditions of the Holy Prophet Muhammad and the practices of early Muslims. In particular, some are concerned that the application of Shariah could impair the economy's ability to accumulate capital since Islamic principles aim at the establishment of a greater degree of social and economic justice through continuous redistribution of income and wealth in favour of the poor and needy. First, Islam does not favour the concentration of wealth in the hands of a few. The Qur'an says,“… in order that it (i.e. wealth) may not merely make a circuit between the wealthy among you”, secondly, Muslims must contribute a proportion of their income and wealth called “Zakat” for the use of the poor and needy. “Keep up prayer and pay Zakat” is the constant term of the Holy Qur'an. There are at least twenty‐seven passages in the Holy Qur'an where the order to pay Zakat and the order to establish prayer occur jointly. Thirdly, Islam urges the believers to spend generously in the cause of God i.e. on the poor and needy. Thus the Qur'an says, “Speak to my servants who have believed that they may establish regular prayers and spend in charity out of substance” (Chapter 14, Verse 31). The Qur'an also says, “Believe in God and His Prophet and spend in charity out of the substance whereof He has made you heirs. For those of you who believe and spend in charity is a great reward”. The reward for spending in charity is specified in Chapter 2, Verse 261, where God says, “The parable of those who spend their substance in the way of God is that of a grain of corn; it groweth seven ears, and each ear hath a hundred grains. God giveth manifold increase to whom he pleaseth; and God careth for all and He knoweth all things”. Fourthly, Islam urges the wealthy to lend God “beautiful loans” in the form of spending in charity. Thus the Qur'an says, “If ye loan to God a beautiful loan, He will double it to your credit and He will grant your forgiveness. For God is most ready to appreciate service, most forebearing”.

This study aims to analyze factors that influence the utilization of remittances by Indonesia Migrant Workers (TKI) and to analyze the role of stakeholders in the implementation of financial inclusion. This research used a mixed method, regression analysis, and Matrix of Alliances and Conflicts: Tactics, Objectives, and Recommendations (MACTOR). This study found that the factors that influence savings are training variables, education, and a dummy variable for widow status. The results when remittance as dependent show that the regional origin, dummy variable for receiving remittances, for training, and for determining the use of remittances by TKI themselves had an effect. The implementation of financial inclusion is needed in the economic development of TKI, and the main actors are migrant workers, assistants, economists, and Bapermas. Actors who have the potential for ambivalence are workers who do not participate in mentoring and do not join BUMDes.

The purpose of this study is to examine two issues about remittances in Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua). First, whether the inflow of remittances impacts income in the long run. Second, what motivates migrants to send remittances? The first issue is analyzed in the context of a permanent income hypothesis, while the second is analyzed in the context of altruism versus self-interest motives.

A panel cointegration method is used to establish the long-run relationship between the variables under consideration. Further, this study uses the fully modified ordinary least squares method (FMOLS) to estimate the impact of remittances on income and consumption. The pooled mean group (PMG) estimation is used.

The test results indicate that remittances into Central American countries do not promote growth in the long run. Central American families may perceive remittances as a permanent income stream and will increase their current consumption. Additionally, the test results indicate that sending remittances of the Central American migrants is mainly driven by altruism. Their primary motive is to support left-behind families at times of economic hardship.

Findings provide an important implication for these Central American countries, as they have potential to boost income by utilizing remittance money in productivity-enhancing activities. This study could also provide valuable information for the governments of labor-exporting countries around the world to encourage and incentivize remittance recipient families to utilize those funds for income-generating activities.

In Central America, this is probably the first attempt in the literature to analyze the impact of remittances in the context of permanent income hypothesis and the motivation of Central American workers to send remittances to their countries of origin.

The authors estimate the determinants of the value of purchases of semi-durable goods using permanent and transitory income, and the demographic characteristics of customers. The purpose is to identify whether individuals face remaining liquidity constraints, and how this friction affects their purchases.

This study uses anonymized data of 516,525 credit card holders, with more than 7,501,065 records of purchases between 2010 and 2015. The authors decompose the income of individuals into permanent and transitory components to test the prevalence of the life cycle–permanent income hypothesis (LC–PIH). Determinants of the value of purchases for constrained and unconstrained consumers are estimated, considering the period in which individual characteristics are valid, the decisions not to make purchases in some months, and the potential endogeneity of the interest rate and the transitory component of income.

The authors present evidence of liquidity constraints for individuals who have used a high percentage of the credit limit on their cards. For these restricted customers, the value of purchases is inelastic to the interest rate, whereas the response is sizable for customers who are less restricted. The restricted customers increase the value of purchases when faced with increases in their credit limit. The elasticity of the value of purchases of semi-durable goods to permanent income is less than that for transitory income; regardless of the constraints, this still supports the LC–PIH.

This credit card is targeted at low- and middle-income individuals in Bogotá. Although the results might be considered as indicative of the behavior of those with similar characteristics in Colombia, the authors regard this work as the study of a particular case. A limitation of this work is that the authors do not have alternative sources of credit at an individual level.

The broad credit channel of monetary policy does not apply to the restricted customers. This should be considered not only by the monetary authority, to understand the true extent of this policy, but also by the financial institutions that use this business model. The monetary authority should be cautious not to overreact when intervening in the money market to try to prompt an adequate consumer response.

Financial institutions have the policy of modifying the credit limits of their customers' credit cards which affects the well-being of restricted customers. Given that the card is aimed at low and middle income individuals, the credit limits of customers who use a high percentage of their credit limit might be increased.

This is the first paper to study liquidity restrictions with a retail credit card in Colombia and Latin America using information on customers' characteristics. The results are highly relevant for the implementation of monetary policy.

The rational expectations‐permanent income hypothesis (REPIH) is nothing new. The initial REPIH of Hall (1978) suggested that no other variable observed in earlier periods, given the inclusion of consumption lagged one period, should have any explanatory power for current consumption (Hall, p.972). The Hall version does not eliminate inclusion of current income in the explanation of consumption. Later work by Flavin (1981) finds that current income contains information about future income by providing signals to changes in permanent income. The means to reveal the innovation of current income signaling changes in permanent income has been to decompose current income into its anticipated and unanticipated components. Flavin suggests that unanticipated changes in current income may affect consumption by signaling changes in current income while anticipated changes in current income are included in the formation of permanent income thus having no affect on consumption.

Using a sample of developed and developing nations (including China and Hong Kong), this study examines the financial market and housing wealth effects on consumption. Housing performs the dual functions as both a commodity providing a flow of housing services and an investment providing a flow of capital income. With an empirical framework based on the permanent income hypothesis, this study's findings suggest that a rise in housing price has both a positive wealth effect and a negative price effect on consumption. While the positive wealth effect is caused by an increase in capital income from housing investment, the negative price effect is caused by an increase in the cost of consuming housing services. Moreover, the sensitivity of consumption to unanticipated changes in housing price is related to the level of financial and institutional development.

This study aims to examine the consumption behaviour in Organization of Islamic Cooperation countries.

Using time series and panel data, this study estimates rational expectations permanent income hypothesis model and the intertemporal elasticity of substitution, and examines the response in consumption to expected and unexpected changes in income.

The evidence supports the phenomenon of loss aversion. The response of consumption to unexpected income changes is statistically significant in only one-third of the countries in the sample. Conversely, the response of consumption to expected income changes is statistically as well as economically significant in one-fourth of the countries in the sample. The intertemporal elasticity of substitution is also statistically insignificant in majority of OIC countries in the sample.

The evidence in support of loss aversion in preferences could help in explaining the low penetration of equity-based risk sharing instruments in Islamic finance.

The excess sensitivity of consumption to income suggests that redistribution efforts to enhance incomes of poor households could help in enhancing their consumption levels.

The study takes a comprehensive sample across time and space for OIC countries as compared to previous studies and also adjusts the budget constraint for Zakat.