I study optimal consumption and investment for retirement in an economic environment where an individual has retirement flexibility and borrowing constraints. I show that Friedman's (1957) permanent income hypothesis (PIH) is generalized with retirement and constrained borrowing against future...

We study the impact of income disaster-which can be triggered by various reasons such as pandemics and technological disruption-on Friedman's permanent income hypothesis. Although the hypothesis is still retained, our general equilibrium model offers two insights. First, with income disaster the...