IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v18y2014i06p1428-1435_00.html
   My bibliography  Save this article

A Note On Uncertainty In Savings Decisions: Can A Naïve Strategy Be Optimal?

Author

Listed:
  • Gomes, Fábio Augusto Reis

Abstract

This paper analyzes the process of decision-making on consumption in a two-period consumption setting, assuming the return on savings is uncertain in the sense of Knight [Risk, Uncertainty, and Profit. Boston: Houghton Mifflin (1921)]. The results imply that a naïve strategy to save zero is optimal for a continuum of income values. Under the Permanent Income Hypothesis, consumption equals current income only when current income is equal to permanent income. Indeed Campbell and Mankiw [in Olivier Blanchard and Stanley Fischer (eds.), NBER Macroeconomics Annual, pp. 185–214. Cambridge, MA: MIT Press (1989)] assumed that consumers who spend their total income are only following a simple rule of thumb. However, the naïve strategy obtained casts doubt on their interpretation.

Suggested Citation

  • Gomes, Fábio Augusto Reis, 2014. "A Note On Uncertainty In Savings Decisions: Can A Naïve Strategy Be Optimal?," Macroeconomic Dynamics, Cambridge University Press, vol. 18(6), pages 1428-1435, September.
    • Handle: RePEc:cup:macdyn:v:18:y:2014:i:06:p:1428-1435_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1365100512001022/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tukhtarova, Ye. Kh., 2015. "Economic behavior of households and their impact on the development model of the country," R-Economy, Ural Federal University, Graduate School of Economics and Management, vol. 1(3), pages 450-455.
    2. Claudio Bonilla & Marcos Vergara, 2022. "New results on precautionary saving and nonlinear risks," Journal of Economics, Springer, vol. 136(2), pages 177-189, July.
    3. repec:idn:jimfjn:v:4:y:2018:i:1f:p:1-16 is not listed on IDEAS
    4. Salman Ahmed Shaikh & Mohd Adib Ismail & Abdul Ghafar Ismail & Shahida Shahimi & Muhammad Hakimi Mohd. Shafiai, 2018. "An Empirical Investigation Of Consumption Behaviour In Selected Oic Countries," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 4(1), pages 101-116, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:18:y:2014:i:06:p:1428-1435_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/mdy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.