Matching and Saving in Continuous Time: Theory

Christian Bayer (bayer@math.tu-berlin.de) and Klaus Wälde
Additional contact information
Christian Bayer: Institute of Mathematics, Technische Universität Berlin, Germany

No 1004, Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz

Abstract: We analyse optimal saving of risk-averse households when labour income stochastically jumps between two states. The generalized Keynes-Ramsey rule includes a precautionary savings term. A phase diagram analysis il- lustrates consumption and wealth dynamics within and between states. There is an endogenous lower and upper limit for wealth. We derive the Fokker-Planck equations for the densities of individual wealth and em- ployment status. These equations also characterize the aggregate distrib- ution of wealth and allow us to describe general equilibrium. An optimal consumption path exists and distributions converge to a unique limiting distribution.

Keywords: matching model; optimal saving; incomplete markets; Poisson uncertainty; Fokker-Planck equations; general equilibrium (search for similar items in EconPapers)
JEL-codes: D91 E24 J63 J64 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010-01-13, Revised 2010-01-13
New Economics Papers: this item is included in nep-dge
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://download.uni-mainz.de/RePEc/pdf/Discussion_Paper_1004.pdf First version, 2010 (application/pdf)

Related works:
Working Paper: Matching and Saving in Continuous Time: Theory (2010)
Working Paper: Matching and Saving in Continuous Time: Theory (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jgu:wpaper:1004

Access Statistics for this paper

More papers in Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz Contact information at EDIRC.
Bibliographic data for series maintained by Research Unit IPP (ipp-mainz@uni-mainz.de).