This study presents a Buffer-Stock version of the Life Cycle Permanent Income Hypothesis (LC/PIH) model calibrated to incorporate microeconomic evidence on the income dynamics of Iranian households. The results show that the predictions of buffer-stock version of LC/PIH predictions are consistent with the consumption/income profile of Iranians and the extensive microeconomic evidence indicating that the marginal propensity to consume (MPC) from human wealth is lower than the 0.02 implied by standard microeconomic models. This paper also shows that the buffer-stock version of the LC/PIH model can explain why consumption in Iran does not closely follow income and differs from income at the household level. It also provides an explanation for why the ratio of household wealth to permanent income in Iran is low and has remained stable despite a sharp slowdown in the expected income growth rate due to global economic sanctions on Iran.
Anvari, F., Barkhordari, S., & Mehrara, M. (2022). Buffer-Stock Saving and the Marginal Propensity for Consumption from Human Wealth in Iran. Iranian Economic Review, (), -. doi: 10.22059/ier.2022.88413
MLA
Farzaneh Anvari; Sajad Barkhordari; Mohsen Mehrara. "Buffer-Stock Saving and the Marginal Propensity for Consumption from Human Wealth in Iran". Iranian Economic Review, , , 2022, -. doi: 10.22059/ier.2022.88413
HARVARD
Anvari, F., Barkhordari, S., Mehrara, M. (2022). 'Buffer-Stock Saving and the Marginal Propensity for Consumption from Human Wealth in Iran', Iranian Economic Review, (), pp. -. doi: 10.22059/ier.2022.88413
VANCOUVER
Anvari, F., Barkhordari, S., Mehrara, M. Buffer-Stock Saving and the Marginal Propensity for Consumption from Human Wealth in Iran. Iranian Economic Review, 2022; (): -. doi: 10.22059/ier.2022.88413
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