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Time Preference and Interest Rate in a dynamic general Equilibrium Model

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  • Wang, Gaowang

Abstract

This paper reexamines the relationship between the time preference rate and the real interest rate in the neoclassical growth model by introducing Keynesian time preference. It is shown that the long-run behavior of the neoclassical growth model persists. When introduucing money by money-in-utility, money is superneutral and the optimal monetary policy is the Friedman rule.

Suggested Citation

  • Wang, Gaowang, 2011. "Time Preference and Interest Rate in a dynamic general Equilibrium Model," MPRA Paper 34063, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:34063
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Keynesian time preference; Monetary Superneutrality; Optimum Quantity of Money;
    All these keywords.

    JEL classification:

    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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