TY  - JOUR
AU  - Carroll,Christopher D.
AU  - Toche,Patrick
TI  - A Tractable Model of Buffer Stock Saving
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15265
PY  - 2009
Y2  - August 2009
UR  - http://www.nber.org/papers/w15265
L1  - http://www.nber.org/papers/w15265.pdf
N1  - Author contact info:
Christopher D. Carroll
Department of Economics
Mergenthaler 440
Johns Hopkins University
Baltimore, MD 21218
Tel: 410/516-7602
Fax: 410/516-7600
E-Mail: ccarroll@jhu.edu

Patrick Toche
Department of Economics and Finance
City University of Hong Kong
Tat Chee  Avenue, Kowloon Tong, Hong Kong
E-Mail: p@toche.net
AB  - We present a tractable model of the effects of nonfinancial risk on intertemporal choice.  Our purpose is to provide a simple framework that can be adopted in fields like representative-agent macroeconomics, corporate finance, or political economy, where most modelers have chosen not to incorporate serious nonfinancial risk because available methods were too complex to yield transparent insights.  Our model produces an intuitive analytical formula for target assets, and we show how to analyze transition dynamics using a familiar Ramsey-style phase diagram.  Despite its starkness, our model captures most of the key implications of nonfinancial risk for intertemporal choice.
ER  -