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Pareto Weights as Wedges in Two-Country Models

David Backus, Chase Coleman, Axelle Ferriere, Spencer Lyon

NBER Working Paper No. 21773
Issued in December 2015
NBER Program(s):International Finance and Macroeconomics

In models with recursive preferences, endogenous variation in Pareto weights would be interpreted as wedges from the perspective of a frictionless model with additive preferences. We describe the behavior of the (relative) Pareto weight in a two-country world and explore its interaction with consumption and the real exchange rate.

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Document Object Identifier (DOI): 10.3386/w21773

Published: David Backus & Chase Coleman & Axelle Ferriere & Spencer Lyon, 2016. "Pareto weights as wedges in two-country models," Journal of Economic Dynamics and Control, . citation courtesy of

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