This paper investigates whether an infinite horizons buffer stock saving model with internal, multiplicative, habit formation preferences can replicate the macroeconomic stylized facts about consumption expenditures on non-durables and services. Individual consumption smoothing and consumption...

The buffer-stock model of precautionary saving has become a workhorse of modern-day consumer theory. Despite its growing popularity, virtually no research has set out to formally investigate whether buffer-stock behavior can replicate the well-known smoothness of aggregate consumption growth...

The buffer-stock model of precautionary saving has become a workhorse of modern-day consumer theory. Despite its growing popularity, virtually no research has set out to formally investigate whether buffer-stock behavior can replicate the well-known smoothness of aggregate consumption growth...