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From Chronic Inflation to Chronic Deflation : Focusing on Expectations and Liquidity Disarray Since Wwii
Calvo, Guillermo A. - 2016
associated with chronic deflation. The discussion highlights the importance of expectations and liquidity, and warns about the … risks of relegating liquidity to a secondary role, as has been the practice in mainstream macro models prior to the Great …
Persistent link: https://www.econbiz.de/10012984757
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Saving and Liquidity Constraints
Deaton, Angus - 2010
This paper is concerned with the theory of saving when consumers are not permitted to borrow, and with the ability of … such a theory to account for some of the stylized facts of saving behavior. When consumers are relatively impatient, and … labor income is a random walk, it is optimal for impatient liquidity constrained consumers simply to consume their incomes …
Persistent link: https://www.econbiz.de/10012763409
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Precautionary Saving and the Marginal Propensity to Consume Out of Permanent Income
Carroll, Christopher D. - 2010
The budget constraint requires that, eventually, consumption must adjust fully to any permanent shock to income. Intuition suggests that, knowing this, optimizing agents will fully adjust their spending immediately upon experiencing a permanent shock. However, this paper shows that if consumers...
Persistent link: https://www.econbiz.de/10013151558
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Incomplete Cost Pass-Through Under Deep Habits
Ravn, Morten O. - 2007
A number of empirical studies document that marginal cost shocks are not fully passed through to prices at the firm level and that prices are substantially less volatile than costs. We show that in the relative-deep-habits model of Ravn, Schmitt-Grohe, and Uribe (2006), firm-specific marginal...
Persistent link: https://www.econbiz.de/10012777389
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What Good is Wealth Without Health? The Effect of Health on the Marginal Utility of Consumption
Finkelstein, Amy - 2010
We estimate how the marginal utility of consumption varies with health. To do so, we develop a simple model in which the impact of health on the marginal utility of consumption can be estimated from data on permanent income, health, and utility proxies. We estimate the model using the Health and...
Persistent link: https://www.econbiz.de/10012759209
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Risk Sharing in Private Information Models with Asset Accumulation : Explaining the Excess Smoothness of Consumption
Attanasio, Orazio - 2010
We derive testable implications of model in which first best allocations are not achieved because of a moral hazard problem with hidden saving. We show that in this environment agents typically achieve more insurance than that obtained under autarchy via saving, and that consumption allocation...
Persistent link: https://www.econbiz.de/10012760291
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Consumption Commitments and Habit Formation
Chetty, Raj - 2010
We analyze the implications of household-level adjustment costs for the dynamics of aggregate consumption. We show that an economy in which agents have ldquo;consumption commitmentsrdquo; is approximately equivalent to a habit formation model in which the habit stock is a weighted average of...
Persistent link: https://www.econbiz.de/10012762536
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Optimal Endowment Destruction Under Campbell-Cochrane Habit Formation
Ljungqvist, Lars - 2009
Campbell and Cochrane (1999) formulate a model that successfully explains a wide variety of asset pricing puzzles, by augmenting the standard power utility function with a time-varying subsistence level, or quot;external habitquot;, that adapts nonlinearly to current and past average consumption...
Persistent link: https://www.econbiz.de/10012764628
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The Wealthy Hand-to-Mouth
Kaplan, Greg - 2014
The wealthy hand-to-mouth are households who hold little or no liquid wealth (cash, checking, and savings accounts), despite owning sizable amounts of illiquid assets (assets that carry a transaction cost, such as housing or retirement accounts). We use survey data on household portfolios for...
Persistent link: https://www.econbiz.de/10013054868
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The Permanent Income Hypothesis Revisited
Christiano, Lawrence J.; Eichenbaum, Martin; Marshall, … - 2021
This paper investigates whether there are simple versions of the permanent income hypothesis which are consistent with the aggregate U.S. consumption and output data. Our analysis is conducted within the confines of a simple dynamic general equilibrium model of aggregate real output, investment,...
Persistent link: https://www.econbiz.de/10013219314