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Intertemporal Substitution in Consumption
Robert E. Hall,Robert E. Hall +1 more
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In this article, the authors studied the relation between the rate of growth of consumption and expected real interest rates and concluded that intertemporal substitution is weak, for if it were strong, the growth rate of consumption would have declined.Abstract:Â
Does a higher real interest rate induce significant postponement of consumption? According to the theory developed here, this question can be answered by studying the relation between the rate of growth of consumption and expected real interest rates In postwar data for the United States, expected real returns have declined over time in the stock market and for savings accounts Over the same period, the rate of growth of consumption has been almost steady The paper concludes that intertemporal substitution is weak, for if it were strong, the growth rate of consumption would have declinedread more
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Habit Formation: A Resolution of the Equity Premium Puzzle
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Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence
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The economics of risk and time
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The Endogenous Determination of Time Preference
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Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework
Larry G. Epstein,Stanley E. Zin +1 more
TL;DR: In this paper, a class of recursive, but not necessarily expected utility, preferences over intertemporal consumption lotteries is developed, which allows risk attitudes to be disentangled from the degree of inter-temporal substitutability, leading to a model of asset returns in which appropriate versions of both the atemporal CAPM and the inter-time consumption-CAPM are nested as special cases.
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Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence
Robert E. Hall,Robert E. Hall +1 more
TL;DR: In this paper, the marginal utility of consumption evolves according to a random walk with trend, and consumption itself should evolve in the same way, and the evidence supports a modified version of the life cycle permanent income hypothesis.
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Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns
TL;DR: In this paper, the authors studied the time-series behavior of asset returns and aggregate consumption in a representative consumer model and imposing restrictions on preferences and the joint distribution of consumption and returns.
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Intertemporal Substitution in Macroeconomics
TL;DR: In this paper, the authors show that the aggregate U.S. data are extremely reluctant to be characterized by a model of this type and that the estimated utility function is often not concave.
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