This paper focuses on the role of habit formation in individual preferencesover consumption and saving. We closely relate to Alessie and Lusardi's(1997) model as we estimate a model which is based on their closed-formsolution, where saving is expressed as a function of lagged saving and...

I propose an intertemporal precautionary-saving model in which the agent's labor income is subject to both permanent and transitory shocks. However, he only observes his total income, not individual components. I show that partial observability of individual components of income gives rise to...

I propose an intertemporal precautionary saving model in which the agent's labor income is subject to (possibly correlated) shocks with different degrees of persistence and volatility. However, he only observes his total income, not individual components. I show that partial observability of...

A theory in which the timing of consumer expectation adjustments is endogenously state-dependent and stochastic is proposed. These expectation adjustments generate highly heterogenous consumption responses to income windfalls: many households do not respond, those who do over-react, the marginal...

This paper presents a closed form consumption function for an individual when he derives utility from both his current and previous consumption and from the consumption of his relevant others. I show that the traditional definition of an individual's marginal propensity to consume (MPC) is too...

This paper derives and estimates a model where durable and non-durable consumption are allowed to be non-separable in utility and individuals face a convex adjustment cost whenever they want to purchase a new durable good. Subjective expectations data allow to identify and estimate the marginal...

The permanent income hypothesis under certainty equivalence implies that optimal consumption is more volatile than labour income, when labour income is positively autocorrelated in first differences. Empirically, certainty equivalence is rejected because observed consumption is excessively...