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/lp/de-gruyter/the-buffer-stock-consumption-model-with-endogenous-income-shifts-NdpRSVcBOZ
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- Publisher
- de Gruyter
- Copyright
- ©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
- ISSN
- 1935-1690
- eISSN
- 1534-5998
- DOI
- 10.2202/1534-6005.1108
- Publisher site
- See Article on Publisher Site
Abstract
AbstractCredit-constrained households must use savings both to smooth consumption and to finance productive investments. This non-separability between consumption and production decisions is ignored in the standard intertemporal buffer-stock consumption model where income growth is exogenous. This paper develops an intertemporal model of household consumption and investment in the presence of credit constraints and income uncertainty. Investment options are modelled as irreversible, indivisible, and non-stationary, allowing for endogenous income growth. The resulting behaviour is markedly different from that of the standard buffer-stock model.
Journal
The B E Journal of Macroeconomics – de Gruyter
Published: Jun 5, 2005
Keywords: Credit constraints; buffer-stock saving; endogenous growth; indivisible and irreversible investments; uncertainty