CONTENTS
1: Theoretical Foundations = 1
1.1 A simple model of intertemporal choice and the life cycle = 2
1.2 On intertemporal preferences = 6
1.3 Intertemporal choice = 21
1.4 On the aggregation of individual behavior = 37
2: Consumption, Growth, and Interest = 44
2.1 Saving and growth = 45
2.2 Saving and interest rates = 59
3: Consumption and Permanent Income = 76
3.1 A formal version of the permanent income hypothesis = 80
3.2 The excess sensitivity of consumption = 87
3.3 Consumption and permanent income: a first summary = 101
4: The Volatility of Consumption = 104
4.1 Measured income and permanent income = 105
4.2 Is consumption too smooth? = 112
4.3 Superior information, smoothness, and sensitivity = 122
4.4 The volatility of consumption: a summary = 133
5: Macroeconomics and Microeconomics = 136
5.1 The permanent income hypothesis and the micro data = 137
5.2 More microeconomic studies of intertemporal choice = 148
5.3 Consumption interactions between households = 163
5.4 The reconciliation of micro and macro evidence = 167
5.5 Macroeconomics and microeconomics: a summary = 175
6: New Directions: Beyond Permanent Income = 177
6.1 Precautionary saving = 177
6.2 Liquidity constraints = 194
6.3 Precautionary saving versus liquidity constraints = 212
7: Understanding Consumption = 214
Bibliography = 222
Index of Names = 235
Index of Subjects = 237
