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Franco Modigliani

Franco Modigliani (June 18, 1918September 25, 2003) was an Italian-American economist, and winner of The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel in 1985.

Born in Italy, he left Italy for the US in 1939 because of his Jewish background and antifascist views.

Modigliani, along with Merton Miller, formulated the important Modigliani-Miller theorem in corporate finance. This demonstrated that under certain assumptions, the value of a firm is not affected by whether it is financed by equity (selling shares) or debt (borrowing money).

He was also the originator of the life-cycle hypothesis, which attempts to explain the level of saving in the economy. Modigliani proposed that consumers would aim for a stable level of income throughout their lifetime, for example by saving during their working years and spending during their retirement.

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