Anticipated consumption and its impact on capital accumulation and growth: "Forward-looking" versus "backward-looking" consumption reference

This paper introduces the idea of anticipated pleasure into the Ramsey growth model, by assuming that in addition to current consumption, an agent's current utility depends upon a reference consumption level based on expected future consumption. Two alternative specifications of the anticipated future consumption levels are considered: an external index and an internal index. We analyze the macrodynamic equilibrium, comparing it to both the standard Ramsey model and the model of habit formation. We establish a number of theoretical propositions characterizing the impact of the anticipated consumption reference on the transitional dynamics and long-run equilibrium, supplementing these with numerical simulations.