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Fiscal Policies in a Stochastic Model with Hyperbolic Discounting

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Author Info

  • Liutang Gong

    (Peking University and Wuhan University)

  • Heng-fu Zou

    (Peking University, Wuhan University, and the World Bank)

Abstract

In this paper, we study the effects of fiscal policies on economy in a stochastic model with hyperbolic discounting rate. With specific assumptions on the production technology, preferences, and stochastic shocks, we derive the explicit solutions to the growth rates of consumption and savings and equilibrium returns on all assets, and give the effects of fiscal policies and discounting rate on growth.

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Bibliographic Info

Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 103.

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Length: 23 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:cuf:wpaper:103

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Web page: http://cema.cufe.edu.cn/
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Related research

Keywords: Fiscal policies; Hyperbolic discounting; Stochastic growth;

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References

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  1. Eaton, Jonathan, 1981. "Fiscal Policy, Inflation and the Accumulation of Risky Capital," Review of Economic Studies, Wiley Blackwell, vol. 48(3), pages 435-45, July.
  2. Obstfeld, Maurice, 1992. "Risk-Taking, Global Diversification, and Growth," CEPR Discussion Papers 688, C.E.P.R. Discussion Papers.
  3. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, December.
  4. Laibson, David, 1998. "Life-cycle consumption and hyperbolic discount functions," European Economic Review, Elsevier, vol. 42(3-5), pages 861-871, May.
  5. Turnovsky, Stephen J, 1993. "Macroeconomic Policies, Growth, and Welfare in a Stochastic Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 953-81, November.
  6. David I. Laibson & Andrea Repetto & Jeremy Tobacman, 1998. "Self-Control and Saving for Retirement," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 91-196.
  7. Fischer, Stanley, 1975. "The Demand for Index Bonds," Journal of Political Economy, University of Chicago Press, vol. 83(3), pages 509-34, June.
  8. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  9. Christopher Harris & David Laibson, 2013. "Instantaneous Gratification," The Quarterly Journal of Economics, Oxford University Press, vol. 128(1), pages 205-248.
  10. Turnovsky, S.J., 1989. "The Effects Of Taxes And Devidend Policy On Capital Accumulation And Macroeconomic Behavior," Working Papers 891101, University of Washington, Department of Economics.
  11. Robert J. Barro, 1999. "Ramsey Meets Laibson In The Neoclassical Growth Model," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1125-1152, November.
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Cited by:
  1. Liutang Gong & William Smith & Heng-fu Zou, 2011. "Asset Prices and Hyperbolic Discounting," CEMA Working Papers 486, China Economics and Management Academy, Central University of Finance and Economics.

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