Government Purchases and Real Interest Rates with Endogenous Time Preference.

This note shows that the observation of low real interest rates during periods of high temporary government purchases, such as wars, can be reconciled with the neoclassical growth model extended to allow for endogenous time preference. Temporary increases in government purchases lead to a fall in the instantaneous rate of time preference. This may result in rising investment and falling real interest rates along an adjustment path.

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Year of publication:	1989
Authors:	Devereux, Michael B.
Institutions:	Economics Department, Queen's University
Subject:	interest rate \| economic growth \| economic models

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Series:	Working Papers.
Type of publication:	Book / Working Paper
Notes:	12 pages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005688535