We analyse life-cycle saving decisions when households use simple heuristics, or rules of thumb, rather than solve the underlying intertemporal optimization problem. We simulate life-cycle saving decisions using three simple rules and compute utility losses relative to the solution of the...

This paper explores whether habit formation in the representative agent’s preferences can explain two failures of the standard permanent income model with intertemporally separable utility: the sensitivity of consumption to lagged consumer sentiment and to predictable changes in current income...

The purpose of this paper is to investigate the evolution of MiltonFriedman's permanent income hypothesis from the 1940s to 1960s, andhow it became the paradigm of modern consumption theory. Modellingunobservables, such as permanent income and permanent consumption, isa long-standing issue in...

A new theory of interest rates, the Neo-Fisherian theory, predicts a low inflation rate due to a central bank's low interest rate. After several years of near-zero interest rate policies and low and even negative infl ation rates in the eurozone and in the US, this theory gained momentum in...

Die Studie folgt der Lebenszyklushypothese nach Modigliani und untersucht die Einflüsse von privatem Einkommen und Vermögen auf den privaten Konsum. Es werden Daten für das wiedervereinigte Deutschland von 1991 bis 2002 verwendet. Die Ergebnisse der linearen Regressionen zeigen eine starke...

In this paper, we use Japanese micro data to examine what characteristics borrowing-constrained households have and whether borrowing constraints have an important influence on household consumption behavior. We identify borrowing-constrained households using three different indicators, some of...

We propose an overlapping generations economy where households care about relative consumption, the difference between their consumption and the consumption of their reference group. An individual's consumption is driven by the comparison of his lifetime income and the lifetime income of his...

We study socially vs. individually optimal lifecycle allocations of consumption and health care, when individual health expenditure curbs own mortality but also has a spillover effect on other persons' survival. Such spillovers arise, for instance, when health care activity at aggregate level...

The outcome of the economic performance of individuals is utilised in the form of consumption and consequent welfare. Despite this truism, there is relatively little information available on household consumption behaviour in Hungary stemming from investigations based on economic theory. The...

If the marginal utility of consumption depends on health status, this will affect the economic analysis of a number of central problems in public finance, including the optimal structure of health insurance and optimal life cycle savings. In this paper, we describe the promises and challenges of...