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dc.contributor.authorWang, Chong
dc.contributor.authorWang, Neng
dc.contributor.authorYang, Jinqiang
dc.date.accessioned2015-09-14T22:43:17Z
dc.date.available2015-09-14T22:43:17Z
dc.date.issued2013-08
dc.identifier.urihttp://hdl.handle.net/10945/46472
dc.descriptionNBER Working Paper No. 19319, August 2013, JEL No. E21en_US
dc.description.abstractWe develop an analytically tractable consumption-savings model for a liquidity-constrained agent who faces both permanent and transitory income shocks. We find that risk aversion and intertemporal substitution have very different effects on both consumption and the steady-state savings target. Moderate changes in risk aversion have large effects on consumption and buffer-stock savings. With permanent shocks, it takes many years to reach the steady-state savings target. We also find that large discrete income shocks (jumps) occurring at low frequencies can be very costly. Unlike conventional wisdom, transitory shocks can generate very large precautionary savings demand, especially for low transitory income states.en_US
dc.rightsThis publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.en_US
dc.titleOptimal consumption and savings with stochastic incomeen_US
dc.typeArticleen_US
dc.contributor.departmentGraduate School of Business & Public Policy (GSBPP)en_US


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