A BEJM Topics article.

Abstract

We examine a model in which the utility function has been engineered so that it is optimal for consumers to aim for a fixed target level of retirement resources. In this case, consumption displays excess sensitivity to current income as well as perfect old age insurance. In an overlapping generations model, this leads naturally to multiple and unstable equilibria. Under static expectations, it also leads to a well-defined dynamics, including possible historical traps, implosions involving ever-diminishing capital stock and ever-increasing interest rates, and the feasibility of optimal one-time interventions.

Submitted: December 27, 2006 · Accepted: March 26, 2008 · Published: March 27, 2008

Recommended Citation

Guha, Brishti and Guha, Ashok S. (2008) "Target Saving in an Overlapping Generations Model," The B.E. Journal of Macroeconomics: Vol. 8 : Iss. 1 (Topics), Article 14.
Available at: http://www.bepress.com/bejm/vol8/iss1/art14