A Note on Dynamic Roy's Identity

Theoretical Economics Letters, 2014, 4, 513-516

5 Pages Posted: 22 Feb 2016 Last revised: 13 Jul 2018

See all articles by Kam Yu

Kam Yu

Lakehead University

Libo Xu

Lakehead University - Department of Economics

Date Written: June 13, 2014

Abstract

Roy's identity is a useful tool in theoretical and empirical studies of static consumption problems. Most dynamic consumer problems, however, concentrate on obtaining the optimal consumption path derived from the Euler equation. In this note we assumes that the consumer makes decision in a two-stage process. In the dynamic stage, two forms of Roy's identity is derived. The first form relates the asset holding in each period to the marginal utility of interest rate and the marginal utility of income. The second form resemble the classic Roy's identity in the static analysis.

Keywords: Roy's identity, Inter-temporal consumption

JEL Classification: D11, E21

Suggested Citation

Yu, Kam and Xu, Libo, A Note on Dynamic Roy's Identity (June 13, 2014). Theoretical Economics Letters, 2014, 4, 513-516 , Available at SSRN: https://ssrn.com/abstract=2736024

Kam Yu (Contact Author)

Lakehead University ( email )

Thunder Bay, P7B 5E1
Canada

HOME PAGE: http://flash.lakeheadu.ca/~kyu/

Libo Xu

Lakehead University - Department of Economics ( email )

Thunder Bay, P7B 5E1
Canada

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