Blundell, Richard; Low, Hamish; Preston, Ian - Institute for Fiscal Studies (IFS) - 2004
between these innovations through a formula
¢lnct = …t [vt +fitut] + ¡t + O(k”tk2) + O(Et¡1k”tk2) (4)
involving two additional … equation to relate consumption growth
to innovations. These innovations are related to income shocks through an approxima-
tion … consumption innovations ("t;"t+1;:::;"T)0:The term
t+i can be seen as an annuitisation factor for consumption.
We now apply the …