Publication Type
Journal Article
Version
publishedVersion
Publication Date
3-2008
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
target saving, history, excess sensitivity, static expectations, rational expectations, uniqueness
Discipline
Behavioral Economics | Macroeconomics
Research Areas
Macroeconomics
Publication
BE Journal of Macroeconomics
Volume
8
Issue
1
First Page
1
Last Page
26
ISSN
1935-1690
Identifier
10.2202/1935-1690.1541
Publisher
De Gruyter
Citation
Guha, Brishti and GUHA, Ashok S..
Target saving in an overlapping generations model. (2008). BE Journal of Macroeconomics. 8, (1), 1-26.
Available at: https://ink.library.smu.edu.sg/soe_research/2261
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.
Additional URL
https://doi.org/10.2202/1935-1690.1541