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Time Preference and International Lending and Borrowing in an Overlapping-Generations Model

  • Willem H. Buiter

Two economies, represented by Diamond-type overlapping-generations models and differing only in their pure rates of time preference, are joined together. Capital formation, balance-of-payments behavior, and welfare are compared under autarky and openness. With a positive natural rate of growth, the low-time-preference country runs a current account surplus in the steady state but not necessarily outside it. If preexisting capital is not shiftable between countries, integration in the world economy makes the high-time-preference country worse off in the short run. The ranking of stationary utility levels under autarky and openness is ambiguous.

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File URL: http://www.nber.org/papers/w0352.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0352.

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Date of creation: May 1979
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Publication status: published as Journal of Political Economy, Vol. 89, No. 4, pp. 769-797, (August 1981).
Handle: RePEc:nbr:nberwo:0352
Note: ITI IFM
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  10. Hori, Hajime & Stein, Jerome L, 1977. "International Growth with Free Trade in Equities and Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(1), pages 83-100, February.
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  13. Joel Fried, 1980. "The Intergenerational Distribution of the Gains from Technical Change and from International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 13(1), pages 65-81, February.
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  15. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
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