Publication Type
Working Paper
Version
publishedVersion
Publication Date
1-2008
Abstract
We examine a model in which the utility function has been engineered so that it is optimal for consumers to aim for a fixed target level of retirement resources. In this case consumption displays excess sensitivity to current income as well as perfect old age insurance. In an overlapping generations model, this leads naturally to multiple and unstable equilibria. Under static expectations, it also leads to a well-defined dynamics, including possible historical traps, implosions involving ever-diminishing capital stock and ever-increasing interest rates, and the feasibility of optimal one-time interventions.
Keywords
Targets, history, excess sensitivity, static expectations, rational expectations, uniqueness.
Discipline
Behavioral Economics | Macroeconomics
Research Areas
Macroeconomics
First Page
1
Last Page
20
Publisher
SMU Economics and Statistics Working Paper Series, No. 01-2008
City or Country
Singapore
Citation
GUHA, Ashok S. and GUHA, Brishti.
Target Saving in an Overlapping Generations Model. (2008). 1-20.
Available at: https://ink.library.smu.edu.sg/soe_research/1081
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
Published in B.E. Journal of Macroeconomics, 2008. https://doi.org/10.2202/1935-1690.1541