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The Discount Rate for Public Policy over the Distant Future
Li, Qingran - 2018
The choice of discount rate has a significant impact on net benefit estimates when costs today have benefits over long time horizons. Standard U.S. government practice for cost-benefit analysis is to bound such analysis using two alternative rates. These rates are meant to represent the rate of...
Persistent link: https://www.econbiz.de/10012481060
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Myopia and Discounting
Gabaix, Xavier - 2017
and combining those signals with priors to form posteriors. These posterior expectations exhibit as-if discounting: agents … forecasting (e.g., those with more intelligence) exhibit less discounting. Agents with more domain-relevant experience exhibit … less discounting. Older agents exhibit less discounting (except those with cognitive decline). Agents who are encouraged to …
Persistent link: https://www.econbiz.de/10012455427
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The Discounted Euler Equation : A Note
McKay, Alisdair - 2016
We present a simple model with income risk and borrowing constraints which yields a "discounted Euler equation." This feature of the model mutes the extent to which news about far future real interest rates (i.e., forward guidance) affects current outcomes. We show that this simple model...
Persistent link: https://www.econbiz.de/10012456545
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Excess Volatility : Beyond Discount Rates
Giglio, Stefano - 2016
We document a form of excess volatility that is irreconcilable with standard models of prices, even after accounting for variation in discount rates. We compare prices of claims on the same cash flow stream but with different maturities. Standard models impose precise internal consistency...
Persistent link: https://www.econbiz.de/10012456629
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Very Long-Run Discount Rates
Giglio, Stefano - 2014
We provide direct estimates of how agents trade off immediate costs and uncertain future benefits that occur in the very long run, 100 or more years away. We exploit a unique feature of housing markets in the U.K. and Singapore, where residential property ownership takes the form of either...
Persistent link: https://www.econbiz.de/10012458531
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The Choice of Discount Rate for Climate Change Policy Evaluation
Goulder, Lawrence H. - 2012
Distinguishing the two rates helps resolve arguments as to whether the choice of discount rate should be based on ethical considerations or empirical information (such as market interest rates), and about whether the discount rate should serve a prescriptive or descriptive role. Separating out...
Persistent link: https://www.econbiz.de/10012460360
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Discount Rates
Cochrane, John H. - 2011
Discount rate variation is the central organizing question of current asset pricing research. I survey facts, theories and applications. We thought returns were uncorrelated over time, so variation in price-dividend ratios was due to variation in expected cashflows. Now it seems all...
Persistent link: https://www.econbiz.de/10012461685
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Corporate Discount Rates
Gormsen, Niels; Huber, Kilian - National Bureau of Economic Research - 2023
Standard theory implies that the discount rates used by firms in investment decisions (i.e., their required returns to capital) determine investment and transmit financial shocks to the real economy. However, there exists little evidence on how firms' discount rates change over time and affect...
Persistent link: https://www.econbiz.de/10014322717
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Social Security Money's Worth
Geanakoplos, John - 2000
This paper describes how three money's worth measures the benefit-to-tax ratio, the internal rate of return, and the net present value are calculated and used in analyses of social security reforms, including systems with privately managed individual accounts invested in equities. Declining...
Persistent link: https://www.econbiz.de/10012471081
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Choosing the Future : Markets, Ethics, and Rapprochement in Social Discounting
Millner, Antony; Heal, Geoffrey - National Bureau of Economic Research - 2021
methods to social discounting, and suggest that they may help us to move beyond long-standing debates that have bedevilled …
Persistent link: https://www.econbiz.de/10012510532