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Social Status, the Spirit of Capitalism, and the Term Structure of Interest Rates in Stochastic Production Economies

  • Liutang Gong

    (Guanghua School of Management, Peking University
    Institute for Advanced Study, Wuhan University)

  • Yulei Luo

    (School of Economics and Finance, University of Hong Kong)

  • Heng-fu Zou

    (Institute for Advanced Study, Wuhan University
    Development Research Group, The World Bank)

This paper studies capital accumulation and equilibrium interest rates in stochastic production economies with the concern of social status. Given a specific utility function and production function, explicit solutions for capital accumulation and equilibrium interest rates have been derived. With the aid of steady-state distributions for capital stock, the effects of fiscal policies, social-status concern, and stochastic shocks on capital accumulation and equilibrium interest rates have been investigated. A significant finding of this paper is the demonstration of multiple stationary distributions for capital stocks and interest rates with the concern of social status.

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Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 372.

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Length: 28 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:cuf:wpaper:372
Contact details of provider: Web page: http://cema.cufe.edu.cn/

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