Government purchases and real interest rates with endogenous time preference
AbstractThis note shows that the observation of low real interest rates during periods of high temporary government purchases, such as wars, can be reconciled with the neoclassical growth model extended to allow for endogenous time preference. Temporary increases in government purchases lead to a fall in the instantaneous rate of time preference. This may result in rising investment and falling real interest rates along an adjustment path.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 35 (1991)
Issue (Month): 2 (February)
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Web page: http://www.elsevier.com/locate/ecolet
Other versions of this item:
- Michael B. Devereux, 1989. "Government Purchases and Real Interest Rates with Endogenous Time Preference," Working Papers 749, Queen's University, Department of Economics.
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- Chang, Wen-ya, 1999. "Government spending, endogenous labor, and capital accumulation," Journal of Economic Dynamics and Control, Elsevier, vol. 23(8), pages 1225-1242, August.
- Gootzeit, Michael & Schneider, Johannes & Smith, William, 2002. "Marshallian recursive preferences and growth," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 381-404, November.
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