Intertemporal dependence, impatience, and dynamics
AbstractThis paper develops simple geometric methods for analyzing dynamic behavior in models with intertemporally dependent consumer tastes. Since the preferences studied do not assume time-additivity, they allow the marginal utility of consumption on a given date to vary with consumption on other dates. Intertemporal dependence is induced by the presence of a variable individual rate of time preference. The optimal consumption responses to transitory and anticipated changes in incomes and interest rates are easily derived and are similar in important ways to the responses implied by the standard model with constant time preference. Intuitive explanations of the first-order conditions describing optimal paths are provided.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 26 (1990)
Issue (Month): 1 (August)
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Web page: http://www.elsevier.com/locate/inca/505566
Other versions of this item:
- Maurice Obstfeld, 1991. "Intertemporal Dependence, Impatience, and Dynamics," NBER Working Papers 3028, National Bureau of Economic Research, Inc.
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