Time Preference and International Lending and Borrowing in an Overlapping-Generations Model

Willem Buiter

No 352, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Two economies, represented by Diamond-type overlapping-generations models and differing only in their pure rates of time preference, are joined together. Capital formation, balance-of-payments behavior, and welfare are compared under autarky and openness. With a positive natural rate of growth, the low-time-preference country runs a current account surplus in the steady state but not necessarily outside it. If preexisting capital is not shiftable between countries, integration in the world economy makes the high-time-preference country worse off in the short run. The ranking of stationary utility levels under autarky and openness is ambiguous.

Date: 1979-05
Note: ITI IFM
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Citations: View citations in EconPapers (10)

Published as Journal of Political Economy, Vol. 89, No. 4, pp. 769-797, (August 1981).

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