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Aggregate Stochastic Implications of the Life Cycle Hypothesis

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  • Clarida, Richard H

Abstract

This paper sets forth some key aggregate stochastic implications of the Modigliani-Brumberg (1980) life cycle hypothesis and explores the extent to which a properly aggregated life cycle model can help to explain the first and second moment properties of changes in per capita consumption. The principal finding of the paper is that smooth per capita consumption in the presence of permanent shocks to per capital labor income is exactly the outcome one should expect from a properly aggregated life cycle model in which saving for retirement, as well as for consumption smoothing, is a motive for asset accumulation. Copyright 1991, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 106 (1991)
Issue (Month): 3 (August)
Pages: 851-67

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Handle: RePEc:tpr:qjecon:v:106:y:1991:i:3:p:851-67

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Cited by:
  1. Jim Malley & Hassan Molana, 2003. "The Life-Cycle-Permanent- Income Hypothesis: A Reinterpretation and Supporting Evidence," Dundee Discussion Papers in Economics 138, Economic Studies, University of Dundee.
  2. Jim Malley & Hassan Molana, 1999. "The Permanent Income Hypothesis Revisited," Dundee Discussion Papers in Economics 105, Economic Studies, University of Dundee.
  3. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January.
  4. Andrew Benito, 2006. "Does job insecurity affect household consumption?," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 157-181, January.
  5. Alvin Tan & Graham Voss, 2000. "Consumption and Wealth," RBA Research Discussion Papers rdp2000-09, Reserve Bank of Australia.
  6. Emilio Fernandez-Corugedo, 2004. "Consumption Theory," Handbooks, Centre for Central Banking Studies, Bank of England, number 23.
  7. Charlotte Ostergaard & Bent E. Serensen & Oved Yosha, 2002. "Consumption and Aggregate Constraints: Evidence from U.S. States and Canadian Provinces," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 634-645, June.
  8. Ramsey, James B., 1996. "On the existence of macro variables and of macro relationships," Journal of Economic Behavior & Organization, Elsevier, vol. 30(3), pages 275-299, September.
  9. Jim Malley & Hassan Molana, 1997. "The Permanent Income Hypothesis Revisited. Reconciling Evidence from Aggregate Data with the Representative Consumer Behaviour," Working Papers 9708, Business School - Economics, University of Glasgow.
  10. Päivi Kankaanranta, 2006. "Consumption Over the Life Cycle: A Selected Literature Review," Discussion Papers 7, Aboa Centre for Economics.
  11. Janine Aron & John Muellbauer, 2000. "Financial Liberalization, Consumption and Debt in South Africa," Economics Series Working Papers WPS/2000-22, University of Oxford, Department of Economics.
  12. Gordon de Brouwer, 1996. "Consumption and Liquidity Constraints in Australia and East Asia: Does Financial Integration Matter?," RBA Research Discussion Papers rdp9602, Reserve Bank of Australia.
  13. Karen E. Dynan, 2000. "Habit Formation in Consumer Preferences: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 90(3), pages 391-406, June.
  14. Jim Malley & Hassan Molana, 2002. "The Life-Cycle-Permanent-Income Model: A Reinterpretation and Supporting Evidence," Working Papers 2002_17, Business School - Economics, University of Glasgow.

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