Extended Model of Precautionary Saving Based on Recursive Utility

How to measure the uncertainty is one of the most important problems in the theory of precautionary saving. This paper establishes an extended model of precautionary saving based on recursive utility (RU-PSM). The new model takes the volatility of consumption, interest rate and the return of risky a...

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Bibliographic Details
Published in2007 International Conference on Wireless Communications, Networking and Mobile Computing pp. 4116 - 4119
Main Authors Xusong Xu, Lili Ma
Format Conference Proceeding
LanguageEnglish
Published IEEE 01.09.2007
Subjects
Economic indicators
Elasticity
Engineering profession
Equations
Measurement uncertainty
Pricing
Psychology
Risk management
Testing
Unemployment
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Summary:How to measure the uncertainty is one of the most important problems in the theory of precautionary saving. This paper establishes an extended model of precautionary saving based on recursive utility (RU-PSM). The new model takes the volatility of consumption, interest rate and the return of risky asset as the measure of the uncertainty and extends the model introduced by Deaton. The new model also implies that the coefficient of risk aversion and the elasticity of intertemporal substitution affect the growth of consumption together.
ISBN:1424413117
9781424413119
ISSN:2161-9646
DOI:10.1109/WICOM.2007.1017