Optimal Intertemporal Consumption under Uncertainty

Gary Chamberlain, Charles A. Wilson

    Research output: Contribution to journalArticlepeer-review


    We analyze the optimal consumption program of an infinitely lived consumer who maximizes the discounted sum of utilities subject to a sequence of budget constraints where both the interest rate and his income are stochastic. We show that if the income and interest rate processes are sufficiently stochastic and the long run average rate of interest is greater than or equal to the discount rate, then consumption eventually grows without bound with probability one. We also establish conditions under which the borrowing constraints must be binding and examine how the income process affects the optimal consumption program. Journal of Economic Literature Classification Number: D91.

    Original languageEnglish (US)
    Pages (from-to)365-395
    Number of pages31
    JournalReview of Economic Dynamics
    Issue number3
    StatePublished - Jul 2000


    • Uncertainty; consumption; permanent income hypothesis

    ASJC Scopus subject areas

    • Economics and Econometrics


    Dive into the research topics of 'Optimal Intertemporal Consumption under Uncertainty'. Together they form a unique fingerprint.

    Cite this