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Approximation Bias in Linearized Euler Equations

Ludvigson, Sydney - 1999

(and the coefficient of relative risk aversion) from regressions of consumption growth on uncertainty in consumption growth … imply estimates of prudence and risk aversion that are unrealistically low. Using numerical solutions to a fairly standard …

Persistent link: https://www.econbiz.de/10012471817

Precautionary Saving in a Financially-Constrained Firm

Abel, Andrew B. - 2020

For a firm that cannot raise external funds, cash on hand serves as precautionary saving. We derive a closed-form expression for the target level of cash on hand in the presence of persistent cash flows. Contrary to conventional wisdom, a mean-preserving increase in the volatility of cash flow...

Persistent link: https://www.econbiz.de/10012479152

Intergenerational Risksharing and Equilibrium Asset Prices

Campbell, John Y. - 2006

optimally shares risks across generations exposes future generations to a share of the risk in physical capital returns. Such a … system reduces precautionary saving and increases the risk-bearing capacity of the economy. Under plausible conditions it … increases the riskless interest rate, lowers the price of physical capital, and reduces the risk premium on physical capital …

Persistent link: https://www.econbiz.de/10012466465

Consumption and Risk Sharing Over the Life Cycle

Storesletten, Kjetil - 2000

.S. savings behavior. The restrictions imposed by general equilibrium theory play an important role in arriving at each of these … characteristics of idiosyncratic labor market risk. We find that uncertainty distributed throughout the working years accounts for 40 …

Persistent link: https://www.econbiz.de/10012470736

How Important is Precautionary Saving?

Carroll, Christopher D. - 1995

We estimate the fraction of the wealth of a sample of PSID respondents that is held because some households face greater income uncertainty than others. We first derive an equation characterizing the theoretical relationship between wealth and uncertainty in a buffer-stock model of saving. Next,...

Persistent link: https://www.econbiz.de/10012473685

Precautionary Saving and Social Insurance

Hubbard, R. Glenn - 1994

Microdata studies of household saving often find a significant group in the population with virtually no wealth, raising concerns about heterogeneity in motives for saving. In particular, this heterogeneity has been interpreted as evidence against the life-cycle model of saving. This paper...

Persistent link: https://www.econbiz.de/10012474023

Fagereng, Andreas - 2017

response to earnings risk based on Euler equation estimates. To address endogeneity problems, we use Norwegian administrative …

Persistent link: https://www.econbiz.de/10012455500

Irreversibility, Uncertainty, and Cyclical Investment

Bernanke, Ben - 1980

The optimal timing of real investment is studied under the assumptions that investment is irreversible and that new information about returns is arriving over time. Investment should be undertaken in this case only when the costs of deferring the project exceed the expected value of information...

Persistent link: https://www.econbiz.de/10012478634

The Effects of Irreversibility and Uncertainty on Capital Accumulation

Abel, Andrew B. - 1995

When investment decisions cannot be reversed and returns to capital are uncertain, the firm faces a higher user cost of capital than if it could reverse its decisions. This higher user cost tends to reduce the firm's capital stock. Opposing this effect is the irreversibility constraint itself:...

Persistent link: https://www.econbiz.de/10012473506

Optimal Investment with Costly Reversibility

Abel, Andrew B. - 1995

Investment is characterized by costly reversibility when a firm can purchase capital at a given price and sell capital at a lower price. We derive an explicit analytic solution for optimal investment by a firm facing costly reversibility. In addition, we derive a local approximation to the...

Persistent link: https://www.econbiz.de/10012473796

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