Abstract
This paper examines the scope and application of the Permanent Income Hypothesis (PIH) in a new way. The authors have computed data on the nonhuman wealth of India for 26 years. Varying parameter regressions are applied to calculate values of permanent income, permanent consumption, transitory income and transitory consumption directly from the wealth data. The proportionality aspect of the PIH as well as its basic assumptions regarding the zero correlation between the permanent and the transitory elements of income, between the permanent and transitory elements of consumption and between the transitory elements of income and consumption are tested. The results of this paper are broadly consistent with the PIH.
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