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A More Realistic Endogenous Time Preference Model and the Slump in Japan

  • Taiji Harashima

    (Cabinet Office of the Japanese Government)

This paper presents a more realistic endogenous time preference model, incorporating the property that impatience decreases as consumption increases. The model overcomes a serious drawback of the existing model, which needs the assumption of increasing impatience. The new model is applied to the Japanese economy, which has been mired in a persistent slump since the early 1990s, and the hypothesis that a time preference rate shift is the main cause of the slump is explored. The estimated time preference rate clearly shows that an upward time preference shift of about 2% occurred in Japan.

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File URL: http://128.118.178.162/eps/mac/papers/0402/0402015.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0402015.

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Length: 35 pages
Date of creation: 06 Feb 2004
Date of revision: 09 Feb 2004
Handle: RePEc:wpa:wuwpma:0402015
Note: Type of Document - pdf; prepared on Windows Me; pages: 35 ; figures: 5 figures and a table included
Contact details of provider: Web page: http://128.118.178.162

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  1. Ng, S. & Perron, P., 1994. "Unit Root Tests ARMA Models with Data Dependent Methods for the Selection of the Truncation Lag," Cahiers de recherche 9423, Universite de Montreal, Departement de sciences economiques.
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  12. 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 611-35, August.
  13. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Growth with Many Consumers," Discussion Papers 518, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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