Theoretical Foundations of Buffer Stock Saving

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Authors

Carroll

Abstract

This paper builds theoretical foundations for rigorous and intuitive understanding of 'buffer stock' saving models, pairing each theoretical result with a quantitative exploration. After describing conditions under which the consumption function converges, the paper shows that 'target' saving behavior, which defines buffer stock saving, arises only under conditions strictly stronger than those that guarantee convergence of the consumption and value functions. It also shows that average consumption growth equals average income growth in a small open economy populated by buffer stock savers. Together, the (provided) numerical tools and (proven) analytical results constitute a comprehensive toolkit for understanding buffer stock models.

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Metadata

Key	Value
tags	REMARK Reproduction
abstract	This paper builds theoretical foundations for rigorous and intuitive understanding of 'buffer stock' saving models, pairing each theoretical result with a quantitative exploration. After describing conditions under which the consumption function converges, the paper shows that 'target' saving behavior, which defines buffer stock saving, arises only under conditions strictly stronger than those that guarantee convergence of the consumption and value functions. It also shows that average consumption growth equals average income growth in a small open economy populated by buffer stock savers. Together, the (provided) numerical tools and (proven) analytical results constitute a comprehensive toolkit for understanding buffer stock models.
authors	{"family-names"=>"Carroll", "given-names"=>"Christopher D.", "orcid"=>"https://orcid.org/0000-0003-3732-9312"}
cff-version	1.1.0
date-released
identifiers	{"type"=>"url", "value"=>"https://github.com/econ-ark/REMARK/master/REMARKs/BufferStockTheory.md"} {"type"=>"doi", "value"=>"10.5281/zenodo.1234"}
keywords	Consumption
message	For a consumption/saving problem with transitory and permanent shocks and unbounded (CRRA) utility, this paper derives conditions under which a nondegenerate solution exists, and under which a target wealth ratio exists; all results are paired with illustrative numerical solutions.
repository-code	https://github.com/llorracc/BufferStockTheory
version	1.0
github_repo_url	https://github.com/llorracc/BufferStockTheory
remark-name	BufferStockTheory
title-original-paper	Theoretical Foundations of Buffer Stock Saving
notebooks	Code/Python/BufferStockTheory.ipynb
dashboards	Code/Python/BufferStockTheory-Interactive-Dashboard.ipynb
identifiers-paper	{"type"=>"url", "value"=>"https://llorracc.github.io/BufferStockTheory"} {"type"=>"doi", "value"=>nil}
date-published-original-paper