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Optimal Intertemporal Consumption Under Uncertainty Author info | Abstract | Publisher info | Download info | Related research | Statistics Gary Chamberlain (Harvard University)
Charles A. Wilson (New York University)
We analyze the optimal consumption program of an infinitely-lived consumer who maximizes the discounted sum of utilities subject to a sequence of budget constraints where both the interest rate and his income are stochastic. We show that if the income and interest rate processes are sufficiently stochastic and the long run average rate of interest is greater than or equal to the discount rate, then consumption eventually grows without bound with probability one. We also establish conditions under which the borrowing constraints must be binding and examine how the income process affects the optimal consumption program. (Copyright: Elsevier)
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics .
Volume (Year): 3 (2000)
Issue (Month): 3 (July)
Pages: 365-395
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Handle: RePEc:red:issued:v:3:y:2000:i:3:p:365-395Contact details of provider: Postal: Review of Economic Dynamics Academic Press Editorial Office 525 "B" Street, Suite 1900 San Diego, CA 92101 Fax: 1-860-486-4463 Email: Web page: http://www.EconomicDynamics.org/review.htm More information through EDIRC
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Keywords: uncertainty ; consumption ; permanent income hypothesis ; Other versions of this item:
Find related papers by JEL classification: D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
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Recursive Macroeconomic Theory
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