Tag: Lifecycle Income Hypothesis

Intertemporal Consumption in Islamic Economic Framework

The difference in an Islamic framework would come with the normative distinction between investments which are declared as prohibited in the ethical injunctions of Islamic faith and other investments which are deemed as permissible.

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Consumption Smoothing – An Islamic Economics Perspective

It is an empirical observation that people desire to have smooth consumption throughout their lifetimes. Lifecycle consumption hypothesis (LCH) and permanent income hypothesis (PIH) try to explain that in micro-founded framework. Both negate the Keynes assertion that average propensity to consume (APC) falls as income rises. Some micro-economic evidence is also broadly consistent with LCH and PIH, at least in advanced economies.

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