Working Paper: NBER ID: w2822
Authors: Philippe Weil
Abstract: In monetary economies, international differences in rates of time preference do not in general lead to long run trade imbalances -- in sharp contrast with Butter's 119811 results on non-monetary overlapping generation economies. This claim is documented within the context of a simple two country framework in which new immortal families enter each economy over time, with the two countries differing only in their subjective discount rates. Even if consumers are more "impatient" at home than abroad, trade is balanced in the long run in the presence of valued fiat currencies in constant supply, and the current account is indeterminate.
Keywords: Monetary Economics; Time Preference; Trade Imbalances
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| international differences in rates of time preference (D15) | long-run trade imbalances (F32) |
| presence of fiat money and financial assets (E40) | balanced trade in the long run (F10) |
| higher rate of time preference (D15) | balanced trade in the long run (F10) |
| presence of unbacked financial assets (G19) | golden rule of consumption (D10) |