On the concavity of the consumption function with the time varying discount rate
AbstractIn this paper, we consider a finite-horizon model with the time-additive utility and the time varying discount rate. With the assumption of the concavity of absolute risk tolerance, the concavity of the consumption function has been proved. This result significantly broadens the conclusion of Carroll and Kimball (1996) for the case of the HARA utility function.
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Bibliographic InfoPaper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 559.
Length: 3 pages
Date of creation: 2012
Date of revision:
Publication status: Published in Economics Letters 117 (2012) 99¨C101
Consumption function; Concavity; Risk tolerance;
Other versions of this item:
- Gong, Liutang & Zhong, Ruquan & Zou, Heng-fu, 2012. "On the concavity of the consumption function with the time varying discount rate," Economics Letters, Elsevier, vol. 117(1), pages 99-101.
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
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- Christopher D. Carroll & Miles S. Kimball, 1995.
"On the concavity of the consumption function,"
Finance and Economics Discussion Series
95-10, Board of Governors of the Federal Reserve System (U.S.).
- Stephen Zeldes, .
"Consumption and Liquidity Constraints: An Empirical Investigation,"
Rodney L. White Center for Financial Research Working Papers
24-85, Wharton School Rodney L. White Center for Financial Research.
- Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-46, April.
- Stephen P. Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers 16-88, Wharton School Rodney L. White Center for Financial Research.
- Shin-Ichi Nishiyama & Ryo Kato, 2011. "On the Concavity of the Consumption Function with a Quadratic Utility under Liquidity Constraints," TERG Discussion Papers 274, Graduate School of Economics and Management, Tohoku University.
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