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

Author

Listed:
  • Taiji Harashima

    (Cabinet Office of the Japanese Government)

Abstract

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.

Suggested Citation

  • Taiji Harashima, 2004. "A More Realistic Endogenous Time Preference Model and the Slump in Japan," Macroeconomics 0402015, University Library of Munich, Germany, revised 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
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0402/0402015.pdf
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Harashima, Taiji, 2017. "Should a Government Fiscally Intervene in a Recession and, If So, How?," MPRA Paper 78053, University Library of Munich, Germany.
    2. Harashima, Taiji, 2014. "Time Preference Shocks," MPRA Paper 60205, University Library of Munich, Germany.
    3. Harashima, Taiji, 2016. "The Impending Long March of the Chinese Economy," MPRA Paper 73275, University Library of Munich, Germany.
    4. Harashima, Taiji, 2015. "Bubbles, Bluffs, and Greed," MPRA Paper 64361, University Library of Munich, Germany.
    5. Harashima, Taiji, 2020. "A Mechanism of Recession that Accompanies Persistent Pareto Inefficiency," MPRA Paper 98468, University Library of Munich, Germany.
    6. Harashima, Taiji, 2022. "A Household’s Preferences Vary Depending on Whether Incomes Are Permanent or Temporary: A Solution to the Time-Inconsistency Problem and Equity-Premium Puzzle," MPRA Paper 114762, University Library of Munich, Germany.
    7. Harashima, Taiji, 2019. "A Pareto Inefficient Path to Steady State in Recession," MPRA Paper 93216, University Library of Munich, Germany.
    8. Harashima, Taiji, 2013. "Escaping a Liquidity Trap: Keynes’ Prescription Is Right But His Reasoning Is Wrong," MPRA Paper 48115, University Library of Munich, Germany.
    9. Taiji HARASHIMA, 2013. "The Phillips Curve And A Micro-Foundation Of Trend Inflation," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 4(2), pages 151-182.
    10. Taiji HARASHIMA, 2016. "A Theory Of Deflation: Can Expectations Be Influenced By A Central Bank?," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 7(2), pages 98-145.
    11. Harashima, Taiji, 2018. "Do Households Actually Generate Rational Expectations? “Invisible Hand” for Steady State," MPRA Paper 88822, University Library of Munich, Germany.
    12. Harashima, Taiji, 2016. "The Cause of the Great Recession: What Caused the Downward Shift of the GDP Trend in the United States?," MPRA Paper 69215, University Library of Munich, Germany.
    13. Harashima, Taiji, 2019. "The Correlation between Time Preference and Incomes Is Spurious: They Are Bridged by Fluid Intelligence," MPRA Paper 96756, University Library of Munich, Germany.

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    More about this item

    Keywords

    Time preference; Uncertainty; Japanese economy; Business fluctuations;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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