This paper solves numerically for the optimal consumption and portfolio choice of an infinitely lived investor facing short-sales and borrowing constraints, undiversifiable labor income risk and a predictable time varying equity premium. The investor aggressively times the market while positive...

This paper introduces the quest for status into the Ramsey model with endogenous labor supply. We focus our attention on relative wealth preferences. In contrast to relative consumption preferences, they allow for the possibility that agents work too little in the long run, while under both...

We investigate possible determinants of the increase of household debt and smaller consumption fluctuations since the 1980s in the US. We use a heterogeneous-agent model, in which labor income is risky and markets are incomplete. Consumers use durables not only as collateral for their debt but...

We solve the optimal saving/portfolio-choice problem in an intertemporal recursive utility framework. Our solution to this problem is sufficiently general to allow (i) risk aversion to vary independently of intertemporal substitution, (ii) many risky assets, (iii) stochastic labor income that...

This paper develops a detailed partial equilibrium model of housing wealth's role over the life-cycle to explore (1) housing's dual role as a consumption and investment good; (2) the significance of the mortgage contract being in nominal and not real terms; and (3) the tax benefits associated...

In this paper we extend the representative agent model of the consumer to incorporate durable consumption goods that generate status, where status depends on relative consumption. The study is done in the neoclassical context and incorporates analytical and numerical results. In the closed...

In this paper we combine the assumption that the consumption function is concave with an AK production function. We show that the set of equilibrium steady-state growth rates is an interval. Then we note that when they exist, unegalitarian equilibria are characterized by higher rates of growth...

This paper considers the cross-sectional aggregation of nonlinear decision rules derived from intertemporal optimization problems under uncertainty, examining in particular (i) the role of aggregation across decision rules of heterogeneous decision makers as a source of variation and persistence...

The paper deals with a newly discovered credit card puzzle. Many US households revolve a balance on high-interest credit cards while holding low-interest liquid or total safe assets that could be used to repay this balance. Such behavior seems to ignore obvious arbitrage opportunities and to...

There are two basic tools to analyse fundamental issues in dynamical macroeconomics. One of them is a model of optimal growth describing savings behaviour. The second one is the Solow-Swan model with a constant aggregate propensity to save out of income. A steady state of the dynamical economic...