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Index 393 and open economy, 358 and price flexibility, 329 underemployment equilibrium, 350–352 wage and price rigidity in, 252–254, 333–334, 335–337, 338–340, 353–354 and Central Bank accommodation dilemma, 254–55 implications in, 337, 340–342 wage rigidity as downward only, 352–353 Keynesian consumption functions and constant term, 67 and consumption function model (Modigliani and Brumberg), 64–66, 68 with addition of variables, 75n.26 vs. New Theories of the Consumption Function, 111 Keynesian money economizing syndrome, 283 Keynesian under-employment equilibrium, 341, 347, 350–352 Keynesian unemployment. See Keynesian analysis of unemployment Klein, Lawrence R., 33–36 Koopmans, Tjalling, 365 Korea income and savings in, 134 national saving rate of, 199, 202 Labor-management consultation, on wages and prices, 255, 256, 266, 270, 372 Labor market. See also Wage rigidity equilibrium in (Keynesian), 251, 341 “flexible” vs. “inflexible,” 212 and Keynes vs. classical models, 327 and unemployment, 223 Labor market flexibility policies, 226–227 Laissez faire capitalistic system, 316n.4 Lange, Oskar, 365, 366 Lao P.D.R., income and savings in, 134 LCH. See Life-Cycle Hypothesis Leff, Nathaniel H., 132 Legal rules and developing countries, 313 and development of security markets, 310–312, 313 and government intervention, 308–309 inadequacy of, 313–314 vs. privileged access to officials, 310 Legislation, economic and Asian economies, 315 and equity vs. efficiency, 306 as government intervention, 306–307 purpose of, 305 Lending contracts, and inflation, 284–288 Leontief, Wassily, 366 Lerner, Abba P., 365 functional finance principle of, 82 Lesotho, income and savings, 135 Leverage of portfolio, 291, 292, 293–294, 300, 303, 373 Liberalization, financial, in developing countries, 313, 315 Liberalization of labor market, in Europe, 226 Liberia, income and savings in, 135 Life cycle, and composition of assets, 31 Life-Cycle Hypothesis (LCH), xi–xii, 107, 141, 179, 363, 379–381. See also Consumption function model and aggregate saving, 111 apparent contradictions of, 141–142, 168 vs. Barro’s model (Ricardian equivalence), 376–377 basic model of, 115 factors other than income affecting saving rate, 117–118 and role of income growth, 115–117, 119 and Bosworth model, 138–139 for China, 173–174, 179, 202 basic data in study of, 174–178, 203–204 and demographic structure, 180–182 and estimation of saving ratio, 187–193 and estimation tests for saving ratio, 193–198 and income growth, 199–202 and inflation, 183–187 and Keynesian model, 178–179 and modeling of permanent variation in per capita income growth rate, 183 and consumption function, 345 (see also Consumption function) and definition of income, 142 and developing countries, 173 (see also Developing contries) empirical tests of in OECD countries, 122 first-difference, 123–124, 127–131 results-level, 122–127 general model of bequests in, 118–119 government in, 119–122 and income, 131 and Bosworth model, 139 in developing countries, 131–137 and inflation, 137–138, 139 and interest rate, 137–138, 139 Italian test of, 143–146, 168 and age-wealth profile, 149–53, 154 dataset for, 146–149 and discrepancy between saving and wealth measures, 157–168 savings estimates with flow data, 153–157 life as finite in (vs. permanent-income hypothesis), 111, 115, 120, 380, 381 among New Theories of Consumption Function, 111 and propensity to consume, 145
394 Index Life-Cycle Hypothesis (LCH) (cont.) and propensity to save during transitory deviations, 191, 348, 380 and steady growth, 179 and test bias toward high-income countries, 131 Life-cycle theory of savings with bequests, 376 Liquidity, and security market development, 311 Liquidity preference, 251, 342–344, 363, 368–369 “Liquidity Preference and the Theory of Interest and Money” (Modigliani), 328, 367 Liquidity trap, 355, 356 Lucas, Robert, 375 Luxembourg communiqué, 212–213 Maastricht agreement, 221, 222, 225, 229 Macroeconomic policy credibility of, 312–313 and economic legislation, 305 Modigliani’s influence in, 363 Macroeconomics, 358, 368 as Keynesian invention, 342 most fertile fields in (Modigliani interview), 378 open-economy, 358, 378 Madagascar, income and savings in, 135 Malawi, income and savings in, 135 Malaysia, income and savings in, 135 Maldives, income and savings in, 135 Mali, income and savings in, 135 Malta, income and savings in, 135 Mandated wealth, 145 Mandatory saving, 143, 144, 157, 168 Marginal propensity to consume, 11–12 and assets, 66 biased estimate of, 72 and income, 65 and inflation impact, 186–187 and transitory variations, 345 Marginal propensity to consume with respect to assets, 30 Marginal propensity to save and cross-section savings-income relation, 32–33 of farmers vs. government employees, 380 and investment multiplier, 346, 348 and time-series propensities, 33 out of transitory income, 348, 380 Marginal utility analysis, 4 Market equilibrium classical model of, 328–329 generalization of notion of, 334 Market failure, economic legislation to limit, 305 Mark-up model, 337, 340, 353 Marschak, Jacob, 365 Mauritania, income and savings in, 135 Mauritius, income and savings in, 135 McCarthyism, at University of Illinois, 367 McKinnon, R., 307 Meade, J. E., 79, 84, 98 Measurement errors of, 60, 72 of expected income, 52–54 Measurement error, and Italian LCH survey, 160, 166–167 Mentoring, Modigliani on (interview), 378 M/E ratio, for six countries, 199 Mexican Mortgage, 287 Mexico income and savings in, 135 U.S. treaty with, 323 Miller, Merton, 363. See also Modigliani-Miller theorem Minimum wage policies, 215–216 restructuring of, 228–230 and unemployment, 358 in Europe, 245–246, 250 and United Kingdom, 220 Miracolo Possibile, II (The Achievable Miracle), 383 MIT (Massachusetts Institute of Technology) Inflation Proof Mortgage developed at, 28 Modigliani at, 366 Mobility of labor geographic, 226 policies to stimulate, 231 Models, econometric, 378 Modigliani, Amedeo (painter), 365 Modigliani, Franco, 363–364 interview with, 364 life of (interview), 364–367 Nobel Prize of, 363, 374 photographs of, ii, v Modigliani, Serena, 364 Modigliani-Miller theorem, 373–374 and Barro hypothesis, 375–376 Monetarism and monetarists in Modigliani interview, 377 for money supply over interest-rate policy, 355 in U.S. under Volker, 322 Monetarist controversy, 355 Monetary mechanism, 250, 327, 331 classical, 250–251, 331, 332–333 Keynesian, 251–252, 331, 342 investment function, 344–345 investment multiplier, 346–347 liquidity preference, 342–344 saving (and consumption) function, 345 saving-investment identity, 346
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THE COLLECTED PAPERS OF FRANCO MODI
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Franco Modigliani in 1992.
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© 2005 Massachusetts Institute of
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CONTENTS Preface Francesco Franco I
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PREFACE The essays collected in thi
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xii Introduction decades of the twe
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THE LIFE-CYCLE HYPOTHESIS I
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4 The Life-Cycle Hypothesis them. W
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6 The Life-Cycle Hypothesis which c
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8 The Life-Cycle Hypothesis extent
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10 The Life-Cycle Hypothesis Assump
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12 The Life-Cycle Hypothesis e dy d
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14 The Life-Cycle Hypothesis We wil
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16 The Life-Cycle Hypothesis The fi
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18 The Life-Cycle Hypothesis We fee
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20 The Life-Cycle Hypothesis P = y
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22 The Life-Cycle Hypothesis y y e
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24 The Life-Cycle Hypothesis consum
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26 The Life-Cycle Hypothesis as an
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28 The Life-Cycle Hypothesis It wil
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30 The Life-Cycle Hypothesis is one
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32 The Life-Cycle Hypothesis The re
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34 The Life-Cycle Hypothesis Unfort
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36 The Life-Cycle Hypothesis basis
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38 The Life-Cycle Hypothesis 14. Fo
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40 The Life-Cycle Hypothesis 33. It
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42 The Life-Cycle Hypothesis which
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44 The Life-Cycle Hypothesis assump
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2 THE “LIFE-CYCLE” HYPOTHESIS O
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The “Life-Cycle” Hypothesis of
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(11) I C 0.634 0.080 0.634 0.092 0.
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3 LONG-RUN IMPLICATIONS OF ALTERNAT
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Long-Run Implications of Alternativ
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Table 3.1 A. Effects of Government
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4 RECENT DECLINES IN THE SAVINGS RA
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Table 4.1 (continued) Regression Va
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Recent Declines in the Savings Rate
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Table 4.2 (continued) First Differe
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Table 4.3 Period & estimation Surpl
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Table 4.4 The Role of Major Variabl
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Table 4.5 Estimates for Developing
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Table 4.6 (continued) Savings Growt
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5 THE AGE-SAVING PROFILE AND THE LI
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The Age Saving Profile 143 It is ob
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The Age Saving Profile 145 The exer
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The Age Saving Profile 147 same coh
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The Age Saving Profile 149 therefor
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The Age Saving Profile 151 One poss
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The Age Saving Profile 153 0 50 100
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The Age Saving Profile 155 0 5 10 1
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The Age Saving Profile 157 -10 -5 0
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10 40 45 Median discretionary savin
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The Age Saving Profile 161 effect f
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The Age Saving Profile 163 between
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The Age Saving Profile 165 tion. Si
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The Age Saving Profile 167 to save
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The Age Saving Profile 169 sampling
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The Age Saving Profile 171 10. One
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6 THE CHINESE SAVING PUZZLE AND THE
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Table 6.1 Chinese Household Income
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The Chinese Saving Puzzle 177 the p
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The Chinese Saving Puzzle 179 Even
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The Chinese Saving Puzzle 181 those
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The Chinese Saving Puzzle 183 3.3.2
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The Chinese Saving Puzzle 185 3. S(
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The Chinese Saving Puzzle 187 ddpCY
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Table 6.3 Estimates of Coefficients
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The Chinese Saving Puzzle 191 respe
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The Chinese Saving Puzzle 193 These
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The Chinese Saving Puzzle 195 marke
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The Chinese Saving Puzzle 197 coeff
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The Chinese Saving Puzzle 199 6 Con
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The Chinese Saving Puzzle 201 Accor
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The Chinese Saving Puzzle 203 Appen
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The Chinese Saving Puzzle 205 Horio
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7 AN ECONOMISTS’ MANIFESTO ON UNE
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An Economists’ Manifesto on Unemp
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240 Unemployment and Monetary Polic
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11 LONG-TERM FINANCING IN AN INFLAT
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Long-Term Financing in an Inflation
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Long-Term Financing in an Inflation
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12 RISK-ADJUSTED PERFORMANCE: HOW T
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Risk-Adjusted Performance 291 portf
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Risk-Adjusted Performance 293 sugge
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Risk-Adjusted Performance 295 Nonet
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Risk-Adjusted Performance 297 relat
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Risk-Adjusted Performance 299 On th
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Risk-Adjusted Performance 301 Nonet
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Risk-Adjusted Performance 303 perfo
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13 THE RULES OF THE GAME AND THE DE
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The Rules of the Game and the Devel
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14 EMERGING ISSUES IN THE WORLD ECO
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Emerging Issues on the World Econom
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328 Miscellanea mammoth unemploymen
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330 Miscellanea important one at th
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332 Miscellanea M M s M d M d Figur
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334 Miscellanea the flexibility of
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336 Miscellanea Table 15.1 (continu
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338 Miscellanea Table 15.2 Unemploy
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340 Miscellanea Table 15.2 (continu
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Page 376: INTERVIEW IV
Page 379 and 380: 364 Interview at Modigliani’s vac
Page 381 and 382: 366 Interview Solow: Now, with Mars
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Page 385 and 386: 370 Interview interest elasticity o
Page 387 and 388: 372 Interview industries such as ag
Page 389 and 390: 374 Interview The theorem, which by
Page 391 and 392: 376 Interview governmental finance
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Page 395 and 396: 380 Interview consequences of “Pe
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Page 400 and 401: INDEX Accelerator effect, 221 Accou
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Page 412 and 413: Index 397 Real wages. See Wages, re
Page 414 and 415: Index 399 Tanzania, income and savi
Page 416: Index 401 “Wedge” between pay a
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