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Ambiguity and the Excess Consumption Growth Puzzle

Author

Listed:
  • Aram Balagyozyan

    (Kania School of Management, The University of Scranton, U.S.A.)

  • Christos Giannikos

    (Zicklin School of Business, Baruch College, The City University of New York, U.S.A.)

Abstract

Using a two-period non-stochastic life-cycle model, Hauenschild and Stahlecker (2001) show that when information about future labor income is ambiguous, individuals may engage in precautionary savings even if their marginal utility is not convex. We extend the methodology of Houenschild and Stahlecker to a model with standard preferences and demonstrate the precautionary savings that consumers accumulate due to ambiguity and fuzzy decision-making possibly explain the "excess consumption growth puzzle."

Suggested Citation

  • Aram Balagyozyan & Christos Giannikos, 2018. "Ambiguity and the Excess Consumption Growth Puzzle," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 17(1), pages 5-15, June.
    • Handle: RePEc:ijb:journl:v:17:y:2018:i:1:p:5-15
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    ambiguity; precautionary savings; consumption growth puzzle; fuzzy sets; intertemporal life-cycle models;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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