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Stochastic implications of the life cycle consumption model under rational habit formation

Published online by Cambridge University Press:  17 August 2016

Carlo C.A. Winder  and
Franz C. Palm
Carlo C.A. Winder
Affiliation:
De Nedcrlandsche Bank N. V.
Franz C. Palm
Affiliation:
University of Maastricht
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Summary

Hall [1978] showed that the life cycle consumption hypothesis implies a first order autoregressive process for the marginal utility of consumption. This paper extends his results by showing that an appropriate pattern of rational habits will lead to an arbitrary autoregressive integrated moving average (ARIMA) process for consumption. Since the framework allows for consumption of durable goods, the analysis extends the results of Mankiw [1982]

Résumé

Résumé

Hall [1978] a montré que l’hypothèse du cycle de vie implique que l’utilité marginale de la consommation est engendrée par un processus autorégressif d’ordre un. Cet article généralise les résultats de Hall en montrant que sous certaines formes de formation d’habitudes l’utilité marginale suit un processus autorégressif integré avec moyenne mobile (AEIMA) général. Comme le résultat s’applique à la consommation de biens durables, il

Keywords

B22D12C32B22D12C32
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 62 , Issue 3-4 , 1996 , pp. 403 - 412
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1996 

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Footnotes

(*)

Stimulating discussions with Rob Alessie and Wayne Ferson and helpful comments of two anonymous referees are gratefully acknowledged.

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