An intriguing problem in stochastic growth theory is as follows: even when the return on investment is arbitrarily high near zero and discounting is arbitrarily mild, long run capital and consumption may be arbitrarily close to zero with probability one. In a convex one-sector model of optimal...

The standard approach to modelling consumption/saving problems is to assume that the decisionmaker is solving a dynamic stochastic optimization problem However under realistic descriptions of utility and uncertainty the optimal consumption/saving decision is so difficult that only recently...

This paper introduces a method for solving numerical dynamic stochastic optimization problems that avoids rootfinding operations. The idea is applicable to many microeconomic and macroeconomic problems, including life cycle, buffer-stock, and stochastic growth problems. Software is provided.

This paper introduces a method for solving numerical dynamic stochastic optimization problems that avoids rootfinding operations. The idea is applicable to many microeconomic and macroeconomic problems, including life cycle, buffer-stock, and stochastic growth problems. Software is provided.

We are interested in three related questions: (1) How should accounting prices be estimated? (2) How should we evaluate policy change in an imperfect economy? (3) How can we check whether intergenerational well-being will be sustained along a projected economic programme? We do not presume that...

During the Great Recession of 2007, unemployment reached nearly 10 percent and the ratio of unemployment to open positions (as measured by the Help Wanted OnLine Index) more than tripled. The weak labor market prompted an unprecedented extension in the length of time in which a claimant can...

The paper studies the determinants of income distribution and growth in an overlapping generations economy withheterogenous households. Our framework has the following main features:heterogeneity of consumers with respect to wealth and parental human capital;intergenerational transfers,...

Most empirical studies assume only monotonic preferences for households. Behavioral research however providessubstantial evidence that preferences for wealth are measured relative to a reference point. In this paper weintroduce and solve a two-period consumption and savings model for a...

We use micro data on young married households from the Japanese Panel Survey of Consumers in order to analyze the importance of borrowing constraints in Japan. We find (1) that 8 to 15 percent of young married Japanese households are borrowing-constrained, (2) that household assets and the...

We estimate the degree of ‘stickiness’ in aggregate consumption growth (sometimes interpreted as reflecting consumption habits) for thirteen advanced economies. We find that, after controlling for measurement error, consumption growth has a high degree of auto-correlation, with a stickiness...