Heterogeneous Time Preferences and Interest Rates - The Preferred Habitat Theory Revisited
AbstractThe influence of heterogeneous time preferences on the term structure is investigated. Motivated by the Preferred Habitat Theory of Modigliani and Sutch, a model for intertemporal preferences accounting for preferred habitats is proposed. In a heterogeneous world, preferred habitats can explain humps in the yield curve. Agents with a long habitat prefer long term bonds to shorter instruments as the Preferred Habitat Theory predicts.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 9903001.
Date of creation: 02 Mar 1999
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Term Structure; Heterogeneity; Preferred Habitats;
Other versions of this item:
- Frank Riedel, 2004. "Heterogeneous time preferences and interest rates—the preferred habitat theory revisited," The European Journal of Finance, Taylor & Francis Journals, vol. 10(1), pages 3-22.
- Riedel, Frank, 1999. "Heterogeneous time preferences and interest rates: The preferred habitat theory revisited," SFB 373 Discussion Papers 1999,23, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
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