Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/233223 
Year of Publication: 
2006
Series/Report no.: 
Discussion paper No. 7
Publisher: 
Aboa Centre for Economics (ACE), Turku
Abstract: 
Simple life cycle and permanent income hypotheses imply that changes in consumption should be unforecastable. Rational forward-looking agents ought to smooth consumption over the life cycle and exhaust the asset stock accumulated during the working career in retirement. Empirical observations seem not to conform to these predictions of the simple theory of intertemporal choice which has given rise to elaborations on the benchmark model. The theoretical discussion of this paper concentrates on the litareture dealing with the seemingly problematic empirical regularities and on proposed explanations. The review of literature focuses particularly on the life cycle issues of consumption behaviour.
Subjects: 
consumption
life cycle
permanent income
JEL: 
B22
D11
D91
E21
Document Type: 
Working Paper

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