A tractable model of buffer stock saving

  • We present a tractable model of the effects of nonfinancial risk on intertemporal choice. Our purpose is to provide a simple framework that can be adopted in fields like representative-agent macroeconomics, corporate finance, or political economy, where most modelers have chosen not to incorporate serious nonfinancial risk because available methods were too complex to yield transparent insights. Our model produces an intuitive analytical formula for target assets, and we show how to analyze transition dynamics using a familiar Ramsey-style phase diagram. Despite its starkness, our model captures most of the key implications of nonfinancial risk for intertemporal choice.

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Metadaten
Author:Christopher D. Carroll, Patrick Toche
URN:urn:nbn:de:hebis:30-68339
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2009,14
Series (Serial Number):CFS working paper series (2009, 14)
Document Type:Working Paper
Language:English
Year of Completion:2009
Year of first Publication:2009
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2009/08/14
Tag:Buffer Stock Saving; Precautionary Saving; Risk; Uncertainty
GND Keyword:Anleihe
HeBIS-PPN:214924424
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C6 Mathematical Methods and Programming / C61 Optimization Techniques; Programming Models; Dynamic Analysis
Licence (German):License LogoDeutsches Urheberrecht