Munich Personal RePEc Archive

The Rate of Time Preference of Government

Harashima, Taiji (2015): The Rate of Time Preference of Government.

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Abstract

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.

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