Analytical results for a model of periodic consumption
Kelly, Clare and Lanot, Gauthier (2003) Analytical results for a model of periodic consumption. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.673).
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This paper presents the partial analytical solution to a model of periodic consumption that incorporates imperfect capital markets and uncertainty. Our model assumes that consumption decisions occur more frequently than income receipt. We show that the week specific consumption functions can be ordered. At low levels of wealth these functions exhibit a “ushaped”pattern between income receipts. We show analytically that changes in the level of the borrowing constraint affect only the level of consumption function and not the MPC whilst mean preserving changes in uncertainty affect both.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Consumption (Economics) -- Mathematical models, Liquidity (Economics), Uncertainty, Rational expectations (Economic theory)|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||April 2003|
|Number of Pages:||45|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
Carroll C. 2001. A Theory of the Consumption Function, with and without Liquidity Constraints. NBER Working Paper no. 8387.
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