Income disaster model with optimal consumption
构建了一个连续时间收入灾难模型，内生决定不完全市场中的随机贴现因子，推导两类代理人的最优消费决策，发现预防性储蓄项压低利率并解释无风险利率之谜，模型还能更好匹配边际消费倾向数据并解释低消费高储蓄之谜。
Abstract We propose a continuous-time income disaster model with optimal consumption. We endogenously determine the stochastic discount factor (SDF) in an incomplete market caused by income disaster. We then derive optimal consumption decisions for two types of agents, one who is exposed to income disaster and another who is not. We find a large incomplete-markets precautionary savings term between the two agents, which pushes the interest rate down and helps to resolve the risk-free rate puzzle. Interestingly, with income disaster the equilibrium interest rate is a decreasing function of risk aversion while the equity premium is an increasing function. Finally, our model can better match empirical marginal propensities to consume numbers and explain the low-consumption-high-savings puzzle.