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Confidence and the Propagation of Demand Shocks
Angeletos, George-Marios; Lian, Chen - 2022
We revisit the question of why shifts in aggregate demand drive business cycles. Our theory combines intertemporal substitution in production with rational confusion, or bounded rationality, in consumption and investment. The first element allows aggregate supply to respond to shifts in...
Persistent link: https://www.econbiz.de/10013297586
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Estimating Dynamic Discrete Choice Models with Hyperbolic Discounting, with an Application to Mammography Decisions
Fang, Hanming - 2010
We extend the semi-parametric estimation method for dynamic discrete choice models using Hotz and Miller's (1993) conditional choice probability (CCP) approach to the setting where individuals may have hyperbolic discounting time preferences and may be naive about their time inconsistency. We...
Persistent link: https://www.econbiz.de/10013137310
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Risk Preferences are Not Time Preferences : Discounted Expected Utility with a Disproportionate Preference for Certainty
Andreoni, James - 2010
Risk and time are intertwined. The present is known while the future is inherently risky. Discounted expected utility provides a simple, coherent structure for analyzing decisions in intertemporal, uncertain environments. However, we document robust violations of discounted expected utility,...
Persistent link: https://www.econbiz.de/10013138320
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The Welfare Cost of Retirement Uncertainty
Caliendo, Frank - 2016
Uncertainty about the timing of retirement is a major financial risk with implications for decision making and welfare over the life cycle. We estimate that the standard deviation of the difference between retirement expectations and actual retirement dates ranges from 4.28 to 6.92 years. We...
Persistent link: https://www.econbiz.de/10012983656
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Behavioral Macroeconomics Via Sparse Dynamic Programming
Gabaix, Xavier - 2016
more, generating realistic dynamics. In the consumption-savings model, the consumer decides to pay little or no attention …
Persistent link: https://www.econbiz.de/10013001781
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The Behavior of Savings and Asset Prices When Preferences and Beliefs are Heterogeneous
Tran, Ngoc-Khanh - 2011
concept driving savings decisions, consumption allocations, prices and return volatilities. Surprisingly, due to the … equilibrium risk sharing, the precautionary savings motive in the aggregate can vastly exceed that of even the most prudent actual … agent in the economy. Consequently, a low real interest rate, resulting from large aggregate savings, can prevail with …
Persistent link: https://www.econbiz.de/10013122647
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A Tractable Model of Buffer Stock Saving
Carroll, Christopher D. - 2010
We present a tractable model of the effects of nonfinancial risk on intertemporal choice. Our purpose is to provide a simple framework that can be adopted in fields like representative-agent macroeconomics, corporate finance, or political economy, where most modelers have chosen not to...
Persistent link: https://www.econbiz.de/10013151146
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The Role of Time Preferences and Exponential-Growth Bias in Retirement Savings
Goda, Gopi Shah - 2015
savings. We assess potential threats to a causal interpretation of our results with a hypothetical choice experiment and …There is considerable variation in retirement savings within income, age, and educational categories. Using a broad … retirement savings, even while controlling for measures of IQ and general financial literacy as well as a rich set of demographic …
Persistent link: https://www.econbiz.de/10013017085
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Saving and Dissaving with Hyperbolic Discounting
Cao, Dan - 2018
Is the standard hyperbolic-discounting model capable of robust qualitative predictions for savings behavior? Despite …
Persistent link: https://www.econbiz.de/10012929001
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Optimal Consumption and Savings with Stochastic Income and Recursive Utility
Wang, Chong - 2013
We develop a tractable incomplete-markets model with an earnings process Y subject to permanent shocks and borrowing constraints. Financial frictions cause the marginal (certainty equivalent) value of wealth W to be greater than unity and decrease with liquidity w = W/Y . Additionally, financial...
Persistent link: https://www.econbiz.de/10013077942