I develop a dynamic theory of luxury consumption, particularly emphasizing the causal effect that pursuit of luxury goods has on wealth accumulation. A quasi-luxury is defined as a good whose marginal rate of substitution is increasing in a utility index. Under certain conditions, it is indeed a...

Using a multicountry model with perfect-foresight dynamic optimization by infinitely-lived households, the authors analyze the dynamics of macroeconomic nonmonetary and monetary variables. The authors show that the most patient country initially accumulates foreign debt but eventually...