The Markov Consumption Problem
نویسنده
چکیده
The paper derives the solution to a simple stochastic continuous-time dynamic control problem in which a consumer determines consumption and saving while moving between employment and unemployment according to a Markov process. The results differ from the permanent income hypothesis and some of Hall’s 1978 results based on autoregressive income shocks. ∗ The author is indebted to Michael Jerison, John Jones, Adrian Masters, Silvio Rendon, David Sattinger, Fang Yang and Kwan Koo Yun for helpful comments. Remaining errors are the responsibility of the author. JEL codes: C61,D91,E21,J64
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