Simulating Optimal Consumption Paths in a Small Open Economy with Uzawa Preferences
AbstractThis paper compares a form of endogenous preferences introduced by Uzawa with additive preferences by simulating the optimal consumption response for a small open economy to permanent and temporary shocks to the world rate of interest. Uzawa preferences, by endogenising the rate of time preference, are more general than additive preferences. Furthermore, in simulations of permanent changes to the rate of interest, additive preferences suffer from the apparent disadvantage of requiring the rate of time preference to be changed exogenously.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 639.
Length: 31 pages
Date of creation: 1998
Date of revision:
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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
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CONSUMPTION ; SIMULATION ; INTEREST RATE;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
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