Households' and firms' subjective inflation expectations play a central role in macroeconomic and intertemporal microeconomic models. We discuss how subjective inflation expectations are measured, the patterns they display, their determinants, and how they shape households' and firms' economic...

We consider an economic agent with dynamic preference over a set of uncertain monetary payoffs. We assume that the agent's preferences are given by utility functions, which are updated in a time-consistent way as more information is becoming available. Our main result is that the agent's...

We derive the equilibrium interest rate and risk premiums using recursive utility for jump-diffusions. Compared to to the continuous version, including jumps allows for a separate risk aversion related to jump size risk in addition to risk aversion related to the continuous part. The jump part...

Hyperbolic discounting (H) is currently the dominant behavioral model of intertemporal choice, since it better explains how people behave than the normatively correct exponential discounting model (E). This paper promotes an arithmetic discounting model (A) which challenges H. First, A is more...

In the last twenty years a growing body of experimental evidence has posed a challenge to the standard Exponential Discounting Model of choice over time. Attention has focused on some specific 'anomalies', notably preference reversal and declining discount rates, leading to the formulation of...

Time-inconsistent, present-biased agents may hold commitment assets hoping to keep their current and future present bias in check. Paternalistic governments, in an effort to help such people, routinely offer commitment machinery such as restrictions (or bans) on early withdrawals from...

Because of the dynamic inconsistency problem in optimal policies of pay-as-you-go (PAYG) systems, parametric reforms tend to be unfair in terms of generational justice and could be inefficient in terms of optimal level of consumption. As long as there are adverse shocks, the planner has to...

We propose a model of parental altruism in relation with child habit formation, where children are unaware of their developing habits while young, and become cognizant of them only on growing up. We show that an altruistic mother (i) maintains the amount of income transferred to her child lower...

This paper quantifies the importance of non-wage job characteristics to workers by estimating a structural on-the-job search model. The model generalizes the standard search framework by allowing workers to search for jobs based on both wages and job-specific non-wage utility flows. Within the...