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The Markov Consumption Problem

  • Michael Sattinger

The paper derives the solution to a simple stochastic continuous-time dynamic control problem in which a consumer determines consumption and saving while moving between employment and unemployment according to a Markov process. The results differ from the permanent income hypothesis and some of Hall's 1978 results based on autoregressive income shocks.

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File URL: http://www.albany.edu/economics/research/workingp/2010/MCP2010wFigures.pdf
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Paper provided by University at Albany, SUNY, Department of Economics in its series Discussion Papers with number 10-02.

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Date of creation: 2010
Date of revision:
Handle: RePEc:nya:albaec:10-02
Contact details of provider: Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
Phone: (518) 442-4735
Fax: (518) 442-4736

Order Information: Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
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