Electronic Resource
Oxford, UK
:
Blackwell Publishing Ltd
Bulletin of economic research
36 (1984), S. 0
ISSN:
1467-8586
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
In econometric investigations of consumption, the econometrician may either estimate the structural relationship or investigate the implication (revealed by Hall) that the marginal utility of consumption follows a random walk. Researchers have been inhibited from following the former route by the lack of an explicit theoretical relationship. This paper removes this inhibition by deriving the optimal consumption strategy of an individual with constant absolute risk-aversion, whose income is generated by an nth order normal autoregressive process. We show that the implied structural relationship is linear in wealth and lagged income terms (up to the nth order). This facilitates informative and efficient econometric exploration of the consumption function.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1467-8586.1984.tb00529.x
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