Precautionary Saving over the Business Cycle

Edouard Challe and Xavier Ragot

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Abstract: We study the macroeconomic implications of time-varying precautionary saving within a general equilibrium model with borrowing constraint and both aggregate shocks and uninsurable idiosyncratic unemployement 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 much closer to the data than that implied by the comparable hand-to-mouth and representative-agent models, and comparable to that produced by the(intractable) Krusell-Smith (1998) model.

Date: 2013-07-10
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
Note: View the original document on HAL open archive server: https://hal.science/hal-00843150v1
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Precautionary Saving Over the Business Cycle (2016)
Working Paper: Precautionary Saving Over the Business Cycle (2016)
Working Paper: Precautionary Saving Over the Business Cycle (2016)
Working Paper: Precautionary Saving Over the Business Cycle (2016)
Working Paper: Precautionary Saving over the Business Cycle (2013)
Working Paper: Precautionary Saving over the Business Cycle (2013)
Working Paper: Precautionary Saving over the Business Cycle (2011)
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