Non-Commitment and Savings in Dynamic Risk-Sharing Contracts
Article [Version of Record]
Is part of
Cahier de recherche ; no. 9806.Publisher(s)
Université de Montréal. Département de sciences économiques.Affiliation
Keywords
- épargne
- consommation
- partage de risque dynamique
- non-engagement
- savings
- consumption
- dynamic risk sharing
- non-commitment
- [JEL:E20] Macroeconomics and Monetary Economics - Consumption, Saving, Production, Employment, and Investment - General
- [JEL:E21] Macroeconomics and Monetary Economics - Consumption, Saving, Production, Employment, and Investment - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth
- [JEL:E20] Macroéconomie et économie monétaire - Consommation, épargne, production, emploi et investissement - Généralités
- [JEL:E21] Macroéconomie et économie monétaire - Consommation, épargne, production, emploi et investissement - Épargne et consommation
Abstract(s)
We characterize the solution to a model of consumption smoothing using financing under non-commitment and savings. We show that, under certain conditions, these two different instruments complement each other perfectly. If the rate of time preference is equal to the interest rate on savings, perfect smoothing can be achieved in finite time. We also show that, when random revenues are generated by periodic investments in capital through a concave production function, the level of smoothing achieved through financial contracts can influence the productive investment efficiency. As long as financial contracts cannot achieve perfect smoothing, productive investment will be used as a complementary smoothing device. Nous caractérisons la solution d'un modèle de lissage de la consommation avec financement externe sujet à des contraintes d'engagement et épargne. Nous démontrons que, sous certaines conditions, l'épargne et le financement externe se complètent parfaitement. Si le taux d'escompte est égal au taux d'intérêt, on obtient en temps fini un lissage parfait. Nous démontrons également que le lissage obtenu sur les marchés financiers affecte l'investissement en capital physique. Lorsque le lissage est imparfait, l'investissement est utilisé pour des fins de lissage.
This document disseminated on Papyrus is the exclusive property of the copyright holders and is protected by the Copyright Act (R.S.C. 1985, c. C-42). It may be used for fair dealing and non-commercial purposes, for private study or research, criticism and review as provided by law. For any other use, written authorization from the copyright holders is required.