Declining discount rates: Economic justifications and implications for long-run policy

Regime switches in interest rates

Christian Gollier (), Phoebe Koundouri () and Theologos Pantelidis

Economic Policy, 2008, vol. 23, issue 56, 758-795

Abstract: Should economic policy target immediate problems like malaria and AIDS? Or should it target climate change, which may have even more dramatic life-threatening effects in the very long term? We discuss how the pattern of discount rates over the planning horizon bears on this important issue. A declining pattern of discount rates is theoretically justified by uncertainty about future economic conditions, and its shape and relevance can be estimated from historical data. We analyse empirically long-term interest rate data from nine countries, construct a weighted average representing a possible global discount rate pattern for a very long range of future dates, and assess its implications for the valuation of carbon mitigation policies.— Christian Gollier, Phoebe Koundouri and Theologos Pantelidis

Date: 2008
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Related works:
Working Paper: Declining Discount Rates: Economic Justifications and Implications for Long-Run Policy (2008)
Working Paper: Declining Discount Rates: Economic Justifications and Implications for Long-Run Policy (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ecpoli:v:23:y:2008:i:56:p:758-795.

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