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The Rate of Time Preference of Government


  • Harashima, Taiji


Here, I examine the mechanism by which the rate of time preference (RTP) of government is formed and present a model of government RTP. The RTP of government has been largely neglected in the study of economics, but it is an important factor in inflation acceleration. The model presented indicates that the RTP of government is determined by the expected RTPs of the median voter and the representative household, as well as the strength of the government’s fluid intelligence. The model also indicates, however, that households actually use “beliefs” or heuristics to generate their expected RTPs of government.

Suggested Citation

  • Harashima, Taiji, 2015. "The Rate of Time Preference of Government," MPRA Paper 65387, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:65387

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    References listed on IDEAS

    1. Stanley Fischer & Ratna Sahay & Carlos A. Végh, 2002. "Modern Hyper- and High Inflations," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 837-880, September.
    2. Taiji Harashima, 2004. "The Ultimate Source of Inflation: A Microfoundation of the Fiscal Theory of the Price Level," Macroeconomics 0409018, EconWPA, revised 30 Mar 2005.
    3. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    4. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 729-758.
    5. Harashima, Taiji, 2015. "A Way Out of the Euro Crisis: Fiscal Transfers Are Indispensable for Sustainability in a Union with Heterogeneous Members," MPRA Paper 63025, University Library of Munich, Germany.
    6. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135-135.
    7. Lawrence J. Christiano & Terry J. Fitzgerald, 2000. "Understanding the fiscal theory of the price level," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-38.
    8. Harashima, Taiji, 2008. "A Microfounded Mechanism of Observed Substantial Inflation Persistence," MPRA Paper 10668, University Library of Munich, Germany.
    9. Obstfeld, Maurice, 1990. "Intertemporal dependence, impatience, and dynamics," Journal of Monetary Economics, Elsevier, vol. 26(1), pages 45-75, August.
    10. Epstein, Larry G & Hynes, J Allan, 1983. "The Rate of Time Preference and Dynamic Economic Analysis," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 611-635, August.
    11. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
    12. Robert A. Becker, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 375-382.
    13. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    Cited by:

    1. Harashima, Taiji, 2016. "A Theory of Deflation: Can Expectations Be Influenced by a Central Bank?," MPRA Paper 71276, University Library of Munich, Germany.

    More about this item


    Time preference; Government; Inflation; Rationality; Fluid intelligence;

    JEL classification:

    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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