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Franco Modigliani and the life-cycle theory of consumption

  • Angus Deaton

    ()

    (Princeton University, Research Program in Development Studies and Center for Health and Wellbeing, Woodrow Wilson School, Princeton (USA))

This paper reviews and discusses the contribution by Franco Modigliani to macroeconomic model building for economist forecasting and policy making. As Paul Samuelson observed, Modigliani's theoretical work was fundamental in the development of the basic framework within which the "post-Keynesian eclecticism" of the later twentieth century developed. In the move from theory to practice two aspects of Modigliani's work are considered: 1) the systemic approach that focuses on the relationship between the short and the long term, 2) the special reference to the mechanism of monetary policy transmission in the use of the macroeconomic model for economic stabilisation policy. What is left today of this contribution is finally briefly discussed, also with reference to some recent proposals on macroeconomic model building.

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File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9845/9730
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Article provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.

Volume (Year): 58 (2005)
Issue (Month): 233-234 ()
Pages: 91-107

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Handle: RePEc:psl:bnlaqr:2005:28
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  1. William Barnett & Robert Solow, 2004. "An Interview With Franco Modigliani," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200407, University of Kansas, Department of Economics, revised Jun 2004.
  2. Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
  3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
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  6. Chris Carroll & Lawrence H. Summers, 1989. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Working Papers 3090, National Bureau of Economic Research, Inc.
  7. Carroll, Christopher D, 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 1-55, February.
  8. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
  9. James Banks & Richard Blundell & Sarah Tanner, 1995. "Is there a retirement-savings puzzle?," IFS Working Papers W95/04, Institute for Fiscal Studies.
  10. repec:att:wimass:9722 is not listed on IDEAS
  11. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
  12. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
  13. Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999. "Consumption Over the Life Cycle," NBER Working Papers 7271, National Bureau of Economic Research, Inc.
  14. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  15. Laurence J. Kotlikoff, 1987. "Intergenerational Transfers and Savings," NBER Working Papers 2237, National Bureau of Economic Research, Inc.
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