Time Preference Shocks

Taiji Harashima

MPRA Paper from University Library of Munich, Germany

Abstract: The rate of time preference (RTP) has traditionally not been regarded as an important source of economic fluctuations. In this paper, I show that it is an important factor influencing economic fluctuations because households must have an expected RTP for the representative household (RTP RH) to behave optimally. Because it is impossible for a household to know the intrinsic RTP RH, it cannot know the parameters of the structural model of the RTP RH. Without a structural model, a household must use its beliefs to generate an expected RTP RH. As a result, the expected value can change more frequently than the intrinsic RTP RH. Because households often change their beliefs about their expected future paths, economic fluctuations caused by time preference shocks also can occur more frequently in an economy than previously thought.

Keywords: Time preference; Economic fluctuations; Business cycles; The representative household; Sustainable heterogeneity (search for similar items in EconPapers)
JEL-codes: D90 E13 E32 (search for similar items in EconPapers)
Date: 2014-11-26
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/60205/1/MPRA_paper_60205.pdf original version (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:pra:mprapa:60205

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).