Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/43240
Authors: 
Carroll, Christopher D.
Toche, Patrick
Year of Publication: 
2009
Series/Report no.: 
CFS Working Paper 2009/14
Abstract: 
We present a tractable model of the effects of nonfinancial risk on intertemporal choice. Our purpose is to provide a simple framework that can be adopted in fields like representative-agent macroeconomics, corporate finance, or political economy, where most modelers have chosen not to incorporate serious nonfinancial risk because available methods were too complex to yield transparent insights. Our model produces an intuitive analytical formula for target assets, and we show how to analyze transition dynamics using a familiar Ramsey-style phase diagram. Despite its starkness, our model captures most of the key implications of nonfinancial risk for intertemporal choice.
Subjects: 
Risk
Uncertainty
Precautionary Saving
Buffer Stock Saving
JEL: 
C61
D11
E24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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