Precautionary Saving Over the Business Cycle
Journal article: We study the macroeconomic implications of time-varying precautionary savings within a general equilibrium model with borrowing constraints, aggregate shocks and uninsurable idiosyncratic unemployment risk. Our framework generates limited cross-sectional household heterogeneity as an equilibrium outcome, thereby making it possible to analyse the role of precautionary saving over the business cycle in an analytically tractable way. The time-series behaviour of aggregate consumption generated by our model is closer to the data than that implied by the hand-to-mouth and representative-agent models, and it is comparable to that produced by the Krusell and Smith (1998) model.
Author(s)
Edouard Challe, Xavier Ragot
Journal
- The Economic Journal
Date of publication
- 2016
Keywords
- Business Cycle
- Business cycle shocks
- Households
- Precautionary saving
Internal reference
- 2441/9labe9r4se65i789685q84drg
Pages
- 135 – 164
URL of the HAL notice
Version
- 1
Volume
- 126