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Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies

Bertrand Wigniolle

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: This paper provides a detailed study of a simple life-cycle consumption model with quasi-hyperbolic discounting and an imperfect financial market. It gives a complete characterization of savings behaviors. The joint assumptions of quasi-hyperbolic discount factors and no-borrowing constraints may lead to non-convexities in selves' objective functions that may imply discontinuous equilibrium strategies. Savings function may undergo jumps and non-momotonicities when the income or the interest rate reach a threshold value. These "anomalies" may exist even for reasonable parameters values.

Keywords: Quasi-hyperbolic preferences; no-borrowing constraint; discontinuous strategies. (search for similar items in EconPapers)
JEL-codes: D03 D91 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
Date: 2011-04
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ftp://mse.univ-paris1.fr/pub/mse/CES2011/11028.pdf (application/pdf)

Related works:
Journal Article: Savings behavior with imperfect capital markets: When hyperbolic discounting leads to discontinuous strategies (2012) Downloads
Working Paper: Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies (2012) Downloads
Working Paper: Savings behavior with imperfect capital markets: when hyperbolic discounting leads to discontinuous strategies (2011) Downloads
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Persistent link: http://EconPapers.repec.org/RePEc:mse:cesdoc:11028

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