Martingale conditions for optimal saving: discrete time

Foldes, Lucien (1978) Martingale conditions for optimal saving: discrete time. Journal of mathematical economics, 5 (1). pp. 83-96. ISSN 0304-4068

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Abstract

Necessary and sufficient conditions are derived for optimal saving in a stochastic neo-classical one-good world with discrete time. The usual technique of dynamic programming is replaced by classical variational and concavity arguments, modified to take account of conditions of measurability which represent the planner's information structure. Familiar conditions of optimality are thus extended to amit production risks represented by quite general random processes - no i.i.d.r.v.s., stationarity or Markov dependence are assumed - while utility and length of life also may be taken as random. It is found that the 'Euler' conditions may be interpreted as martingale properties of shadow prices.

Item Type:	Article
Official URL:	http://www.sciencedirect.com/science/journal/03044...
Additional Information:	© 1978 Elsevier Science
Library of Congress subject classification:	H Social Sciences > HB Economic Theory H Social Sciences > HA Statistics
Journal of Economic Literature Classification System:	E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty D - Microeconomics > D9 - Intertemporal Choice and Growth > D90 - General O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models
Sets:	Research centres and groups > Financial Markets Group (FMG) Collections > Economists Online Departments > Economics
Rights:	http://www.lse.ac.uk/library/rights/LSERO.htm
URL:	http://eprints.lse.ac.uk/3231/

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