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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Liutang Gong & Yulei Luo & Heng-fu Zou, 2009. "Social Status, the Spirit of Capitalism, and the Term Structure of Interest Rates in Stochastic Production Economies," CEMA Working Papers 372, China Economics and Management Academy, Central University of Finance and Economics.
  • Handle: RePEc:cuf:wpaper:372
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    References listed on IDEAS

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    More about this item

    Keywords

    Stochastic growth; Social status; Fiscal policies; Interest rates;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • H0 - Public Economics - - General
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General

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