Abstract
A type of complete financial market with finite and countable heterogeneous investors, that is, investors equipped with heterogeneous elasticities of intertemporal substitution, heterogeneous time discount rates, and also heterogeneous beliefs, is constructed and two main results are established. First, long-run behaviors, specifically golden rules or modified golden rules, about consumption path and wealth accumulation are investigated under uncertainty and in the sense of uniform topology. Second, inefficacy of temporary taxation policies, which are chosen to be consumption tax and wealth tax, is confirmed in the current financial market.
Highlights
Our goal in this paper is to explore the golden rule or modified golden rule properties of consumption and wealthaccumulation dynamics, as well as the effects of temporary taxation policies, which are chosen to be consumption tax and wealth tax, in a type of complete financial market with finite and countable heterogeneous investors, that is, investors with heterogeneous elasticities of intertemporal substitution (e.g., [2, 3]), heterogeneous time discount rates (e.g., [2,3,4]), and heterogeneous beliefs, choosing optimal consumption and portfolio strategy in an economy of infinite horizon
Golden rules about the consumption path, the wealth dynamics, and the combination of both are proved under uncertainty and in the sense of uniform topology, which would be regarded as the first innovation of the current paper
Noting that portfolio choice, consumption strategy, and wealth accumulation are important issues in financial economics, especially in asset pricing models and market selection theories, and portfolio turnpikes has attracted broad interest of investigation while little attention has been focused on the turnpike or golden rule properties about consumption path and wealth dynamics in financial economics
Summary
Our goal in this paper is to explore the golden rule or modified golden rule properties of consumption and wealthaccumulation dynamics, as well as the effects of temporary taxation policies, which are chosen to be consumption tax and wealth tax, in a type of complete financial market with finite and countable heterogeneous investors (see, [1], e.g.), that is, investors with heterogeneous elasticities of intertemporal substitution (e.g., [2, 3]), heterogeneous time discount rates (e.g., [2,3,4]), and heterogeneous beliefs (see, [2, 3, 5,6,7,8], and among others), choosing optimal consumption and portfolio strategy in an economy of infinite horizon. As in the literatures of Yano [38, 39] and Kondo [40], the current paper proves the conclusion of inefficacy of temporary taxation policies in a type of complete financial market with heterogeneous investors in comparatively weak conditions, which are different from those of Yano [38, 39] and Kondo [40] due to the dynamic competitive-equilibrium framework they employed Both this paper and Jin [13] investigate the long-run behavior of consumption process in a continuous-time finance model, it is worthwhile mentioning that our results are essentially different from those of Jin [13] in the following aspects.
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