International Macroeconomic Policy: When Wealth Affects People's Impatience

Peng Wang and Heng-Fu Zou (hzoucema@gmail.com)

No 530, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: Under a modified neo-classical framework, this paper reexamined the effect of international macroeconomic policies by rejecting the routine assumption of a constant rate of time preference. In the model presented here, we suppose the holdings of real financial wealth will affect people's impatience which has far-reaching implications towards various core issues in international macroeconomics. The introducing of wealth into instantaneous discounting function yields intriguing dynamics of consumption, real balances, and foreign bond holdings. One interesting feature of our model is that stationary rate of time preference no longer necessarily equals real interest rate. We also find that central bank's foreign exchange intervention is not super-neutral even if households capitalize all transfers from the government, which contradicts Obstfeld(1981) in that the distribution of the economy¡¯s claims on the rest of the world between the public and the central bank is relevant to the economic performance. The monetary policy affects the real factors, but how the economy behaves in the long run and in the short run differs a lot from Uzawa(1968) and Obstfeld(1981).

Keywords: international macroeconomic policy; impatience; foreign exchange; monetary policy (search for similar items in EconPapers)
JEL-codes: D90 F3 F4 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2012
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-opm
References: Add references at CitEc
Citations:

Downloads: (external link)
http://down.aefweb.net/WorkingPapers/w530.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:530

Access Statistics for this paper

More papers in CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics Contact information at EDIRC.
Bibliographic data for series maintained by Qiang Gao (mutecamel@gmail.com).