We study the consumption and portfolio selection problem of an agent who faces consumption irreversibility: there is disutility from changing consumption levels. The derived preference exhibits intertemporal loss aversion toward consumption changes with the previous consumption level being the...

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...

This paper studies how "rational inattention (RI)" -- a type of information processing constraint proposed by Sims (2003) -- affects the joint dynamics of consumption and income in a permanent income model with general income processes. Specifically, I propose an analytical approach to solve the...

Recessions often have detrimental effects on both employment and equity returns, forcing individuals to make decisions about how to balance risks to their labor and capital income. In this paper, we study how individuals allocate their limited attention between capital income and labor income...

Although rational consumers without bequest motives are better oÞ investing exclusively with annuitized instruments in partial equilibrium, we demonstrate the welfare effect of annuitization is ambiguous in general equilibrium on account of the pecuniary externality. Accidental bequests improve...

We propose a recursive utility version of a basic Huggett (1993) model to study the implications of rational inattention (or RI, Sims 2003, 2010) for the cross-sectional dispersion of consumption and wealth (relative to income) in general equilibrium. We find that incorporating RI can...

This paper derives the general equilibrium effects of rational inattention (or RI; Sims 2003, 010) in a model of incomplete income insurance (Huggett 1993, Wang 2003). We first show that, under the assumption of CARA utility with Gaussian shocks, the permanent income hypothesis (PIH) arises in...

This paper analyzes panic buying of storable consumer goods, using a novel macroeconomic model of consumers' inventory adjustment featuring search frictions in shopping. Even if consumers are fully rational, an anticipated temporary increase in consumer shopping costs (caused by a disaster...

This paper examines the structure and evolution of consumption and consumption growth inequality. Once heterogeneous agents relate their neighbors' consumption to their own, consumption volatility and inequality are affected. The relationship predicted between the group average consumption...