This book provides an overview of recent research on saving and consumption, a field in which substantial progress has been made over the last decade. Economists attempting to understand saving and consumption patterns have generated some of the best science in economics. For more than fifty years, there has been serious empirical and theoretical activity--never separating data, theory, and policy as has happened in many branches of economics. Research has drawn microeconomists interested in household behavior, as well as macroeconomists, for whom the behavior of aggregate consumption has always occupied a central role in explaining aggregate fluctuations. Econometricians have also made distinguished contributions, and there has been a steady flow of new methodologies by those working on saving and consumption, in time-series econometrics, as well as in the study of micro and panel data. A coherent account of these developments is presented here, emphasizing the interplay between micro and the macro, between studies of cross-section and panels, and those using aggregate time series data.
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aggregate consumption aggregate data aggregate shocks assets assumptions autocorrelation autoregressive average behavior borrow calculate cash in hand change in consumption change in income change in permanent Chapter coefficient cohort constant consumers consumption and income consumption change consumption function consumption growth correlation cycle Deaton discounted durable econometric effects empirical estimates Euler equation evidence example excess smoothness felicity functions Flavin future income growth rate Hall and Mishkin households implies income process increase individual innovations in income instrumental variables intertemporal choice isoelastic labor income life-cycle hypothesis life-cycle model liquidity constraints macroeconomic marginal felicity marginal utility martingale measurement error moving-average negative orthogonal parameters period permanent income hypothesis permanent income theory positive possible precautionary motive precautionary saving preferences problem PSID random-walk rate of growth rate of time-preference real interest rate regression representative agent risk-aversion sensitivity tests standard stationary substitution sumption time-series tion uncertainty utility function variables variance Zeldes zero