Households' income heterogeneity is important to explain consumption dynamics in response to aggregate macro … uncertainty: an increase in uncertainty generates a consumption drop that is stronger for income poorer households. At the same … market can account for these empirical findings. The mechanism at play is a feedback loop between income poorer households …

This paper shows how uninsurable unemployment risk is crucial to qualitatively and quantitatively match macro responses … households in the bottom 60% of the income distribution. Standard representative-agent New Keynesian models have difficulty to … behaviors, triggering a fall in aggregate demand and supply. These precautionary behaviors increase the unemployment risk of the …

between unemployment risk and precautionary saving. Using the estimated model to measure the contribution of precautionary … savings to the propagation of recent recessions, we find strong aggregate demand effects during the Great Recession and, to a …

increased savings help resolve the so-called risk-free rate puzzle. By proposing a novel utility function that features first …-order. In that case, the presence of a small, positive-mean risk to future wealth reduces saving, while first-order prudence can …-order prudence, we show that the risk-free rate puzzle can be resolved even within the EU paradigm. …

disastrous income risk. We first empirically explore the relations among consumption changes, aggregate income, disaster shock … income risk to which the agent is exposed and her income recovery post disaster jointly affect the agent's optimal decisions …In this paper, we develop an analytically tractable dynamic model of optimal consumption and savings decisions with …

uninsured capital income risk, and suffer from an information-processing capacity constraint. For given attention devoted to … capital income risk, we solve for the optimal consumption-saving choices and show that the expected welfare is increasing with … households would pay more attention to capital income risk if they have (i) lower initial wealth endowment, (ii) lower marginal …

theoretical predictions, we find that an increase in income risk is associated with higher savings for loss-averse individuals … the internal margin, i.e., the strength, of loss aversion, and empirically study the relation between income risk …, experimentally elicited loss aversion and precautionary savings. We do so using a sample of 640 individuals from the low-income …

related studies find that low-income households hold low levels of precautionary savings. Using a simple theoretical model, we …Our estimates indicate that 24% of net wealth is attributed to precautionary savings in Australia. Moreover, across the … income distribution, we find that low-income households have the highest fraction of their wealth accumulation explained by …

related studies find that low-income households hold low levels of precautionary savings. Using a simple theoretical model, we …Our estimates indicate that 24% of net wealth is attributed to precautionary savings in Australia. Moreover, across the … income distribution, we find that low-income households have the highest fraction of their wealth accumulation explained by …