In recent years there has been a resurgence of interest in the empirical behavior of inventories. A great deal of this research examines some variant of the production smoothing model of finished goods inventories. The overall assessment of this model that exists in the literature is quite...

In recent years there has been a resurgence of interest in the empirical behavior of inventories. A great deal of this research examines some variant of the production smoothing model of finished goods inventories. The overall assessment of this model that exists in the literature is quite...

Several recent studies have suggested that empirical rejections of the permanent income/life cycle model might be due to the existence of liquidity constraints. This paper tests the permanent income hypothesis against the alternative hypothesis that consumers optimize subject to a well specified...

When can a government borrow a dollar and never pay back any interest or principal? We call such an arrangement under perfect foresight a rational Ponzi game. We use the transversality condition facing individual agents to show that rational Ponzi games require an infinity of lenders. The...

Microdata studies of household saving often find a significant group in the population with virtually no wealth, rising concerns about heterogeneity in motives for saving. In particular, this heterogeneity has been interpreted as evidence against the life-cycle model of saving. This paper argues...

Under certain conditions, a government can run a "rational Ponzi game," i.e., issue debt and never repay any interest or principal. Does Ricardian equivalence hold with respect to a tax cut that is financed by such a scheme? We study this question using overlapping generations models in which...

In this paper, it is shown that risk aversion plays a critical role in the determination of the equilibrium stock prices and their variability in a one-asset pure exchange economy. Specifically, it is argued that the variance of equilibrium stock prices is a strictly increasing convex function...

This paper analyzes the joy of giving bequest motive in which the utility obtained from leaving a bequest depends only on the size of the bequest. It exploits the fact that this formulation can be interpreted as a reduced form of an altruistic bequest motive to derive a relation between the...