Precautionary Savings under Liquidity Constraints: A Decomposition
This paper investigates the effects of liquidity constraints on consumption/saving by separating precautionary saving caused by liquidity constraints (PS2) from the conventional precautionary saving made against income uncertainty (PS1). It is proved that there exists a unique level of wealth below which PS2 is strictly positive and above which liquidity constraints have no effects at all. The numerical simulations show that PS2 is quantitatively important, depending on age and the level of wealth. Some empirical findings in the literature cannot be explained by PS1 alone but are consistent with the model in which PS2 is present. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 36 (1995)
Issue (Month): 3 (August)
|Contact details of provider:|| Postal: |
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:36:y:1995:i:3:p:675-90. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or ()
If references are entirely missing, you can add them using this form.