Abstract
The overlapping generations model with life-time uncertainty is capable of generating unfamiliar, nonmonotonic adjustment phenomena that are attributed to a transitory savings motive. Slowly falling (increasing) wages create transitory savings (dis-)incentives which vanish in the long run when wage profiles become stationary again. Such a transitory savings component comes on top of a base component created by the permanently operating long-run savings incentives, and it easily gives rise to overshooting adjustment. Assets and consumption may even move first in a direction opposite to the implied long-run changes.
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Keuschnigg, C. The vanishing savings motive. Zeitschr. f. Nationalökonomie 60, 189–197 (1994). https://doi.org/10.1007/BF01227866
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DOI: https://doi.org/10.1007/BF01227866