Debating about the Discount Rate:The Basic Economic Ingredients

Christian Gollier ()

Perspektiven der Wirtschaftspolitik, 2010, vol. 11, issue s1, 38-55

Abstract: Abstract: In this paper, we describe the determinants of the socially efficient discount rate for the distant future. We provide various arguments in favour of a decreasing term structure. They are based on a precautionary argument given the rapid accumulation oif uncertainties affecting the future growth of our economies. We recommend a real discount rate of 2% for time horizons exceeding 50 years. A risk premium should be added to this rate if the project yields cash flows that are positively correlated with the growth of the economy.

Date: 2010
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https://doi.org/10.1111/j.1468-2516.2010.00327.x

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