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The Markov Consumption Problem

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  • Michael Sattinger

Abstract

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.

Suggested Citation

  • Michael Sattinger, 2010. "The Markov Consumption Problem," Discussion Papers 10-02, University at Albany, SUNY, Department of Economics.
  • Handle: RePEc:nya:albaec:10-02
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