宏觀經(jīng)濟(jì)學(xué)課件 CHAP17

MACROECONOMICS?2010WorthPublishers,allrightsreservedSEVENTHEDITIONPowerPoint?SlidesbyRonCronovichN.GregoryMankiwCHAPTERConsumption17ModifiedforEC204byBobMurphyInthischapter,youwilllearn:anintroductiontothemostprominentworkonconsumption,including:JohnMaynardKeynes:consumptionandcurrentincomeIrvingFisher:intertemporalchoiceFrancoModigliani:thelife-cyclehypothesisMiltonFriedman:thepermanentincomehypothesisRobertHall:therandom-walkhypothesisDavidLaibson:thepullofinstantgratification3CHAPTER17

ConsumptionKeynes’sconjectures1.

0<MPC<12.

Averagepropensitytoconsume(APC

)

fallsasincomerises.

(APC=C/Y)3.

Incomeisthemaindeterminantof

consumption.4CHAPTER17

ConsumptionTheKeynesianconsumptionfunctionCY1cc=MPC=slopeoftheconsumptionfunction5CHAPTER17

ConsumptionTheKeynesianconsumptionfunctionCYslope=APCAsincomerises,consumerssaveabiggerfractionoftheirincome,soAPCfalls.6CHAPTER17

ConsumptionEarlyempiricalsuccesses:

ResultsfromearlystudiesHouseholdswithhigherincomes:consumemore,?

MPC>0savemore,?

MPC<1savealargerfractionoftheirincome,

?

APC

↓asY

↑Verystrongcorrelationbetweenincomeandconsumption:

?incomeseemedtobethemain

determinantofconsumption7CHAPTER17

ConsumptionProblemsforthe

KeynesianconsumptionfunctionBasedontheKeynesianconsumptionfunction,economistspredictedthatC

wouldgrowmoreslowlythanY

overtime.Thispredictiondidnotcometrue:Asincomesgrew,APCdidnotfall,

andC

grewatthesamerateasincome.SimonKuznetsshowedthatC/Y

was

verystableinlongtimeseriesdata.8CHAPTER17

ConsumptionTheConsumptionPuzzleCYConsumptionfunctionfromlongtimeseriesdata(constantAPC)Consumptionfunctionfromcross-sectionalhouseholddata(fallingAPC)9CHAPTER17

ConsumptionIrvingFisherandIntertemporalChoiceThebasisformuchsubsequentworkonconsumption.Assumesconsumerisforward-lookingandchoosesconsumptionforthepresentandfuturetomaximizelifetimesatisfaction.Consumer’schoicesaresubjecttoanintertemporalbudgetconstraint,

ameasureofthetotalresourcesavailableforpresentandfutureconsumption.10CHAPTER17

ConsumptionThebasictwo-periodmodelPeriod1:thepresentPeriod2:thefutureNotation

Y1,Y2=incomeinperiod1,2

C1,C2=consumptioninperiod1,2

S=Y1

?

C1=savinginperiod1 (S<0iftheconsumerborrowsinperiod1)11CHAPTER17

ConsumptionDerivingtheintertemporal

budgetconstraintPeriod2budgetconstraint:Rearrangeterms:Dividethroughby(1+r

)toget…12CHAPTER17

ConsumptionTheintertemporalbudgetconstraintpresentvalueoflifetimeconsumptionpresentvalueoflifetimeincome13CHAPTER17

ConsumptionTheintertemporalbudgetconstraintThebudgetconstraintshowsallcombinations

ofC1andC2thatjustexhausttheconsumer’sresources.C1C2Y1Y2BorrowingSavingConsumption=incomeinbothperiods14CHAPTER17

ConsumptionTheintertemporalbudgetconstraintTheslopeofthebudgetlineequals

?(1+r)C1C2Y1Y21(1+r

)15CHAPTER17

ConsumptionConsumerpreferencesAnindifferencecurveshows

allcombinationsofC1andC2

thatmaketheconsumer

equallyhappy.C1C2IC1IC2Higherindifferencecurvesrepresenthigherlevelsofhappiness.16CHAPTER17

ConsumptionConsumerpreferencesMarginalrateofsubstitution(MRS

):theamountofC2

theconsumer

wouldbewillingtosubstitutefor

oneunitofC1.C1C2IC1TheslopeofanindifferencecurveatanypointequalstheMRS

atthatpoint.1MRS17CHAPTER17

ConsumptionOptimizationTheoptimal(C1,C2)iswherethe

budgetline

justtouches

thehighestindifferencecurve.C1C2OAttheoptimalpoint,MRS=1+r18CHAPTER17

ConsumptionHowCrespondstochangesinYAnincrease

inY1orY2

shiftsthe

budgetlineoutward.C1C2Results:

Providedtheyarebothnormalgoods,C1andC2bothincrease,…regardlessofwhethertheincomeincreaseoccursinperiod1orperiod2.19CHAPTER17

ConsumptionKeynesvs.FisherKeynes:

Currentconsumptiondependsonlyon

currentincome.Fisher:

Currentconsumptiondependsonlyon

thepresentvalueoflifetimeincome.

Thetimingofincomeisirrelevant

becausetheconsumercanborroworlendbetweenperiods.20CHAPTER17

ConsumptionAHowCrespondstochangesinrAnincreaseinrpivotsthebudgetlinearoundthe

point(Y1,Y2

).C1C2Y1Y2ABAsdepictedhere,

C1fallsandC2

rises.However,itcouldturnoutdifferently…21CHAPTER17

ConsumptionHowCrespondstochangesinrincomeeffect:Ifconsumerisasaver,

theriseinr

makeshimbetteroff,whichtendstoincreaseconsumptioninbothperiods.substitutioneffect:Theriseinrincreases

theopportunitycostofcurrentconsumption,

whichtendstoreduceC1andincreaseC2.Botheffects?↑C2. WhetherC1risesorfallsdependsontherelativesizeoftheincome&substitutioneffects.22CHAPTER17

ConsumptionConstraintsonborrowingInFisher’stheory,thetimingofincomeisirrelevant:Consumercanborrowandlendacrossperiods.Example:Ifconsumerlearnsthatherfutureincomewillincrease,shecanspreadtheextraconsumptionoverbothperiodsbyborrowinginthecurrentperiod.However,ifconsumerfacesborrowingconstraints(aka“l(fā)iquidityconstraints”),thenshemaynotbeabletoincreasecurrentconsumption …andherconsumptionmaybehaveasintheKeynesiantheoryeventhoughsheisrational&forward-looking.23CHAPTER17

ConsumptionConstraintsonborrowingThebudgetlinewithnoborrowingconstraintsC1C2Y1Y224CHAPTER17

ConsumptionConstraintsonborrowingTheborrowingconstrainttakestheform:C1

≤

Y1C1C2Y1Y2Thebudgetlinewithaborrowingconstraint25CHAPTER17

ConsumptionConsumeroptimizationwhentheborrowingconstraintisnotbindingTheborrowingconstraintisnotbindingiftheconsumer’s

optimalC1

islessthanY1.C1C2Y126CHAPTER17

ConsumptionConsumeroptimizationwhentheborrowingconstraintisbindingTheoptimalchoiceisatpointD.Butsincetheconsumercannotborrow,thebesthecandoispointE.C1C2Y1DE27CHAPTER17

ConsumptionTheLife-CycleHypothesisduetoFrancoModigliani(1950s)Fisher’smodelsaysthatconsumptiondependsonlifetimeincome,andpeopletrytoachievesmoothconsumption.TheLCHsaysthatincomevariessystematicallyoverthephasesoftheconsumer’s“l(fā)ifecycle,” andsavingallowstheconsumertoachievesmoothconsumption.28CHAPTER17

ConsumptionTheLife-CycleHypothesisThebasicmodel:

W=initialwealth

Y=annualincomeuntilretirement (assumedconstant)

R=numberofyearsuntilretirement

T=lifetimeinyearsAssumptions:zerorealinterestrate(forsimplicity)consumption-smoothingisoptimal29CHAPTER17

ConsumptionTheLife-CycleHypothesisLifetimeresources=W+RYToachievesmoothconsumption,

consumerdividesherresourcesequallyovertime:

C=(W+RY)/T,or

C=αW+

βY

whereα=(1/T)isthemarginalpropensityto

consumeoutofwealthβ=(R/T)isthemarginalpropensitytoconsumeoutofincome30CHAPTER17

ConsumptionImplicationsoftheLife-CycleHypothesisTheLCHcansolvetheconsumptionpuzzle:Thelife-cycleconsumptionfunctionimplies

APC=C/Y=α(W/Y)+

β

Acrosshouseholds,incomevariesmorethanwealth,sohigh-incomehouseholdsshouldhavealowerAPCthanlow-incomehouseholds.Overtime,aggregatewealthandincomegrowtogether,causingAPCtoremainstable.31CHAPTER17

ConsumptionImplicationsoftheLife-CycleHypothesisTheLCHimpliesthatsavingvariessystematicallyoveraperson’slifetime.SavingDissavingRetirement

beginsEnd

oflifeConsumptionIncome$Wealth32CHAPTER17

ConsumptionSavingandtheThreatofNuclearWar33CHAPTER17

ConsumptionThePermanentIncomeHypothesisduetoMiltonFriedman(1957)Y=Y

P+Y

T whereY= currentincomeY

P= permanentincome

averageincome,whichpeopleexpecttopersistintothefutureY

T= transitoryincome

temporarydeviationsfromaverageincome34CHAPTER17

ConsumptionThePermanentIncomeHypothesisConsumersusesaving&borrowingtosmoothconsumptioninresponsetotransitorychangesinincome.ThePIHconsumptionfunction:

C=α

Y

P

whereαisthefractionofpermanentincomethatpeopleconsumeperyear.35CHAPTER17

ConsumptionThePIHcansolvetheconsumptionpuzzle:ThePIHimplies

APC=C

/

Y=α

Y

P/

Y

Ifhigh-incomehouseholdshavehighertransitoryincomethanlow-incomehouseholds,

APCislowerinhigh-incomehouseholds.Overthelongrun,incomevariationisduemainly(ifnotsolely)tovariationinpermanentincome,whichimpliesastableAPC.ThePermanentIncomeHypothesis36CHAPTER17

ConsumptionThe1975TaxRebate37CHAPTER17

ConsumptionThe1975TaxRebate38CHAPTER17

ConsumptionThe1975TaxRebate39CHAPTER17

ConsumptionPIHvs.LCHBoth:peopletrytosmooththeirconsumption

inthefaceofchangingcurrentincome.LCH:currentincomechangessystematically

aspeoplemovethroughtheirlifecycle.PIH:currentincomeissubjecttorandom,transitoryfluctuations.Bothcanexplaintheconsumptionpuzzle.40CHAPTER17

ConsumptionTheRandom-WalkHypothesisduetoRobertHall(1978)basedonFisher’smodel&PIH,

inwhichforward-lookingconsumersbaseconsumptiononexpectedfutureincomeHalladdstheassumptionof

rationalexpectations,

thatpeopleuseallavailableinformation

toforecastfuturevariableslikeincome.41CHAPTER17

ConsumptionTheRandom-WalkHypothesisIfPIHiscorrectandconsumershaverationalexpectations,thenconsumptionshouldfollowarandomwalk:changesinconsumptionshould

beunpredictable.Achangeinincomeorwealththatwasanticipatedhasalreadybeenfactoredintoexpectedpermanentincome,

soitwillnotchangeconsumption.Onlyunanticipatedchangesinincomeorwealththatalterexpectedpermanentincome

willchangeconsumption.42CHAPTER17

ConsumptionImplicationoftheR-WHypothesisIfconsumersobeythePIH

andhaverationalexpectations,thenpolicychanges

willaffectconsumption

onlyiftheyareunanticipated.43CHAPTER17

ConsumptionDoConsumersAnticipateChangesinSocialSecurityBenefits?Benefitincreaseannouncedatleast6weekspriortotakingeffectConsumersshouldadjustconsumptionwhenlearnofincrease,notwhenreceiveitUsemonthlydataonconsumerspendingtotestRE-PIHpredictionisrejectedasconsumptionrespondstoactualchangesinbenefitsandnottoannouncedchangesMaybeduetoliquidityorborrowingconstraints,or,perhaps,failureofrationalexpectations44CHAPTER17

ConsumptionThePsychologyofInstantGratificationTheoriesfromFishertoHallassumethatconsumersarerationalandacttomaximizelifetimeutility.RecentstudiesbyDavidLaibsonandothersconsiderthepsychologyofconsumers.45CHAPTER17

ConsumptionThePsychologyofInstantGratificationConsumersconsiderthemselvestobeimperfectdecision-makers.Inonesurvey,76%saidtheywerenotsavingenoughforretirement.Laibson:The“pullofinstantgratification”explainswhypeopledon’tsaveasmuchasaperfectlyrationallifetimeutilitymaximizerwouldsave.46CHAPTER17

ConsumptionTwoquestionsandtimeinconsistency1.

Wouldyouprefer(A)acandytoday,or

(B)twocandiestomorrow?2.

Wouldyouprefer(A)acandyin100days,or

(B)twocandiesin101days?Instudies,mostpeopleanswered(A)to1and(B)to2.Apersonconfrontedwithquestion2maychoose(B).Butin100days,whenconfrontedwithquestion1,

thepullofinstantgratificationmayinducehertochangeheranswerto(A).47CHAPTER17

ConsumptionSummingupKeynes:consumptiondependsprimarilyoncurrentincome.Recentwork:consumptionalsodependsonexpectedfutureincomewealthinterestratesEconomistsdisagreeovertherelativeimportanceofthesefactors,borrowingconstraints,andpsychologicalfactors.ChapterSummary1. KeynesianconsumptiontheoryKeynes’c