Theoretical Foundations of Buffer Stock Saving

43 Pages Posted: 28 Oct 2004 Last revised: 13 Mar 2022

See all articles by Christopher D. Carroll

Christopher D. Carroll

Johns Hopkins University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: November 2004

Abstract

"Buffer-stock" versions of the dynamic stochastic optimizing model of saving are now standard in the consumption literature. This paper builds theoretical foundations for rigorous understanding of the main characteristics of buffer stock models, including the existence of a target level of wealth and the proposition that aggregate consumption growth equals aggregate income growth in a small open economy populated by buffer stock consumers.

Suggested Citation

Carroll, Christopher D., Theoretical Foundations of Buffer Stock Saving (November 2004). NBER Working Paper No. w10867, Available at SSRN: https://ssrn.com/abstract=612069

Christopher D. Carroll (Contact Author)

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