Robust consumption policy with the desire for wealth accumulation

Wang, Y; Niu, Y; Gong, S

Robust consumption policy with the desire for wealth accumulation

Wang, Y Niu, Y Gong, S

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Publisher:: Springer
Publication Type:: Journal Article
Citation:: Review of Economics of the Household, 2022, 20, (3), pp. 993-1025
Issue Date:: 2022-01-01

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Field	Value	Language
dc.contributor.author	Wang, Y
dc.contributor.author	Niu, Y
dc.contributor.author	Gong, S
dc.date.accessioned	2022-11-01T22:08:27Z
dc.date.available	2022-11-01T22:08:27Z
dc.date.issued	2022-01-01
dc.identifier.citation	Review of Economics of the Household, 2022, 20, (3), pp. 993-1025
dc.identifier.issn	1569-5239
dc.identifier.issn	1573-7152
dc.identifier.uri	http://hdl.handle.net/10453/163119
dc.description.abstract	We study the optimal consumption-saving problem for consumers who are ambiguous about labor income shocks and have a preference for (absolute) wealth. It is shown that the preference for wealth interacts with the degree of ambiguity in non-trivial ways in determining the optimal consumption. The model predicts that ambiguity and preference for wealth can produce substitution or complementarity effects on consumption. In addition, we find that the interactions of ambiguity and desire for wealth generate different implications for MPCs. We then show that these interactions significantly influence the contribution of ambiguity to excess sensitivity of consumption growth and the contribution of preference for wealth to excess smoothness of consumption.
dc.language	en
dc.publisher	Springer
dc.relation.ispartof	Review of Economics of the Household
dc.relation.isbasedon	10.1007/s11150-021-09551-0
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1402 Applied Economics, 1499 Other Economics
dc.subject.classification	Economics
dc.title	Robust consumption policy with the desire for wealth accumulation
dc.type	Journal Article
utslib.citation.volume	20
utslib.for	1402 Applied Economics
utslib.for	1499 Other Economics
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/DVC (International)
utslib.copyright.status	closed_access	*
pubs.consider-herdc	false
dc.date.updated	2022-11-01T22:08:25Z
pubs.issue	3
pubs.publication-status	Published
pubs.volume	20
utslib.citation.issue	3

Abstract:

We study the optimal consumption-saving problem for consumers who are ambiguous about labor income shocks and have a preference for (absolute) wealth. It is shown that the preference for wealth interacts with the degree of ambiguity in non-trivial ways in determining the optimal consumption. The model predicts that ambiguity and preference for wealth can produce substitution or complementarity effects on consumption. In addition, we find that the interactions of ambiguity and desire for wealth generate different implications for MPCs. We then show that these interactions significantly influence the contribution of ambiguity to excess sensitivity of consumption growth and the contribution of preference for wealth to excess smoothness of consumption.

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http://hdl.handle.net/10453/163119