Résumé
We solve a version of the analytical Real Business Cycle (RBC) model with a predetermined rate of return on household saving. The solution differs from that of the benchmark RBC model along two dimensions: (i) Policy functions depend on the variance of the technology shock. (ii) There is a suboptimal pattern of excess saving. We discuss the economic intuition underlying these properties. We also demonstrate that unconditional welfare can be higher in the suboptimal model with predetermined interest rates, providing a clear illustration of the pitfall with unconditional welfare comparisons.
Mots-clés
RBC model; predetermined interest rates; over-saving; conditional and unconditional welfare;
Codes JEL
- E21: Consumption • Saving • Wealth
- E32: Business Fluctuations • Cycles
- E43: Interest Rates: Determination, Term Structure, and Effects
Remplace
Patrick Fève, Alban Moura et Olivier Pierrard, « Predetermined Interest Rates in a Analytical RBC model », TSE Working Paper, n° 18-954, septembre 2018.
Référence
Patrick Fève, Alban Moura et Olivier Pierrard, « Predetermined Interest Rates in a Analytical RBC model », Economics Letters, vol. 172, novembre 2018, p. 12–15.
Voir aussi
Publié dans
Economics Letters, vol. 172, novembre 2018, p. 12–15