In this paper, we analyse anew the relationship between aggregate income and consumption in the United Kingdom. Our analysis entails a close examination of the structure of the data, for which we employ a variety of spectral methods which depend on the concepts of Fourier analysis. We discover...

This paper considers value functions for maximization problems where the objective function is maximized subject to several constraints. I show that such value functions exhibit diminishing marginal rates of substitution (MRS) between the resource endowments which define the constraints. For the...

Economists working with numerical solutions to the optimal consumption/saving problem under uncertainty have long known that there are quantitatively important interactions between liquidity constraints and precautionary saving behavior. This paper provides the analytical basis for those...

This paper argues that the modern stochastic consumption model, in which impatient consumers face uninsurable labor income risk, matches Milton Friedman's (1957) original description of the Permanent Income Hypothesis much better than the perfect foresight or certainty equivalent models did. The...