The authors examine the extent to which permanent terms-of-trade shocks have an asymmetric effect on private savings. Using a simple three-period model, they show that if households expect to face binding constraints on borrowing in bad states of nature (when the economy is in a long trough...

Economic theory predicts that earnings uncertainty increases precautionary saving and causes households to include relatively liquid assets in their portfolios. Risk avoidance and the demand for liquidity cause these portfolio choices. Studies investigating United States evidence of...

This paper generalizes Deaton's (1991) approach to saving under borrowing constraints to incorporate portfolio choice. For infinite horizon, impatient consumers, effects of risk aversion, prudence and temperance on portfolios can be different from those obtained in atemporal models. We confirm...

Since its publication over 60 years ago, Keynes' General Theory of Employment, Interest and Prices (1936) has substantially influenced both macroeconomic theory and popular opinion about what governments can and should do. However, the extent to which counter-cyclical stabilization has actually...

We use a Canadian survey of the unemployment to examine how household expenditures after a job loss respond to the level of income replacement provided by UI.

The focus of this paper is the link between income volatility and the accumulation of human capital in the presence of credit constraints. Also, the effect of income inequality on the accumulation of human capital within the same framework is studied.