Synopses & Reviews
Synopsis
Excerpt from The Interaction Between Time-Nonseparable Preferences and Time Aggregaton
Consider a situation in which there is a representative consumer with time-separable preferences over consumption facing a constant interest rate that equals the consumer's pure rate of time preference. In this case the euler equation for the consumer implies that the marginal utility of consumption is a martingale (see, for example Hall Under the further restriction that preferences are quadratic, with a constant bliss point, the model implies that consumption, is a martingale.
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