Campbell (2006) stressed the two main challenges of household finance: empirical analyses that highlight how households do invest (i.e. positive household finance) have important measurement problems, while suggestions about how investments should be made (i.e. normative household finance)...

Using dynamic programming methodology, the paper analyzes the most general conditions for an additive utility functional to represent time consistent preferences. It challenges the conventional wisdom of the domain, which, following Strotz(1956), assume that only exponential discounting is...

Hyperbolic discounting with naiveté is widely believed to provide a better explanation than exponential discounting of why people borrow so much and why they wait so long to save for retirement. We reach a different set of conclusions. We show that if financial planning is enriched to include...

What are the economic effects of a central bank that takes the evolution of house prices into account? In an attempt to answer this question, we use a New Keynesian dynamic stochastic general equilibrium model with a housing sector to explore the economic impacts of a central bank reacting to...

This paper studies whether anomalies in consumption can be explained by a behavioral model in which agents make predictable errors in forecasting income. We use a micro-data set containing subjective expectations about future income. The paper shows that, the null hypothesis of rational...