How important is precautionary saving?

Article Abstract:

Engagement in precautionary saving proved to be beneficial to consumers. Simulations of an econometric model revealed that majority of precautionary saving occurs mainly to act as protection against relatively large shocks, such as long-term unemployment. It was also revealed that consumers adopt a buffer-stock saving behavior until they reach the age of 50 years old and shift to traditional life cycle retirement saving thereafter.

Economics, Research and Development in the Social Sciences and Humanities, Models, Econometrics, Savings

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Standard risk aversion

Article Abstract:

An analysis of standard risk aversion is presented. The concept is introduced through the presentation of a utility function where risks which react negatively to wealthvariations also have negative interactions with undesirable independent risk. Results show that decreasing absolute risk aversion and decreasing absolute prudence are vital for standard risk aversion, under monotonicity and concavityasumptions.

Analysis, Economic aspects, Risk (Economics), Risk perception

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On the concavity of the consumption function

Article Abstract:

The macroeconomic theory that the intertemporal consumption function is concave was first forwarded by economists in the 1930s. However, recent econometric studies show that the consumption function is linear, whether implicitly or explicitly. This theory prompted economists to introduce concavity to consumption rules that were linear in the absence of uncertainty.

Consumption (Economics), Macroeconomics

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