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

Carlo C. A. Winder and Franz C. Palm
Recherches Économiques de Louvain / Louvain Economic Review
Vol. 62, No. 3/4, MODELLING MACROECONOMIC DYNAMICS : RECENT DEVELOPMENTS (1996), pp. 403-412
Stable URL: http://www.jstor.org/stable/40724134
Page Count: 10
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Stochastic implications of the life cycle consumption model under rational habit formation
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Abstract

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 (ARIMA) général. Comme le résultat s'applique à la consommation de biens durables, il 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]

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