CEU Electronic Theses and Dissertations, 2016
| Author | Stancsics, Martin |
|---|---|
| Title | Interest Rates and Asset Distributions of Naive Hyperbolic Discounters |
| Summary | This thesis extends the heterogeneous agent incomplete market model of Huggett (1993) with partially naive hyperbolic discounting. An Euler-equation is derived for the agents with this discounting model. Possible pathologies of this Euler-equation and the consumption function are considered, providing insight into the consequences and side effects of naiveté. The purpose of this paper is the analysis of how parameters of the discounting function influence the risk-free rate and asset distributions. It is found that the level of naiveté plays a particularly important part in determining interest rates -- high levels of it imply high interest rates. The other main result is that there might be large inequalities in heterogeneous populations (where heterogeneity is in the hyperbolic discount factor and the level of naiveté). This thesis shows that it also has significant welfare consequences -- especially when the heterogeneity is in naiveté. This might be an important area of research in the future for policy analysis. |
| Supervisor | Briglevics, Tamás |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2016/stancsics_martin.pdf |
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