The Markov Consumption Problem

Sattinger, Michael

doi:10.2139/ssrn.1591041

Abstract

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The Markov Consumption Problem

Michael Sattinger

University at Albany, SUNY - Department of Economics

April 12, 2010

Abstract:
The paper derives the solution to a simple stochastic continuous-time dynamic control problem in which a consumer determines consumption and saving while moving between employment and unemployment according to a Markov process. The results differ from the permanent income hypothesis and some of Hall's 1978 results based on auto-regressive income shocks.

Number of Pages in PDF File: 29

Keywords: Consumption, Saving, Markov Process, Bankruptcy

JEL Classification: C61, D91, E21, J64

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Date posted: April 16, 2010

Suggested Citation

Sattinger, Michael, The Markov Consumption Problem (April 12, 2010). Available at SSRN: http://ssrn.com/abstract=1591041 or http://dx.doi.org/10.2139/ssrn.1591041

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Michael Sattinger (Contact Author)

University at Albany, SUNY - Department of Economics ( email )

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