NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Time Preference and International Lending and Borrowing in an Overlapping-Generations Model

Willem H. Buiter

NBER Working Paper No. 352 (Also Reprint No. r0216)
Issued in May 1979
NBER Program(s):   ITI   IFM

Two economies, represented by Diamond-type overlapping-generations models and differing only in their pure rates of time preference, are joined together. Capital formation, balance-of-payments behavior, and welfare are compared under autarky and openness. With a positive natural rate of growth, the low-time-preference country runs a current account surplus in the steady state but not necessarily outside it. If preexisting capital is not shiftable between countries, integration in the world economy makes the high-time-preference country worse off in the short run. The ranking of stationary utility levels under autarky and openness is ambiguous.

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Document Object Identifier (DOI): 10.3386/w0352

Published: Journal of Political Economy, Vol. 89, No. 4, pp. 769-797, (August 1981).

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