Term Structure of Psychological Interest Rates: A Behavioral Test
44 Pages Posted: 21 Sep 2009
Date Written: September 20, 2009
Abstract
The subjective value given to time is a core concept of microeconomic choices. Using a sample of individuals questioned with regard to their time preference attitudes, we show that the subjective interest rate follows a negatively sloped term structure. It can be parameterized using two variables, one specifying the instantaneous time preference, the other characterizing the slope of the term structure. A trade-off law is identified between these two parameters. We also show that the term structure of psychological rates depends strongly on gender. We also question the cross relationship between risk aversion and time preference.
Keywords: subjective interest rate, time preference, behavioral economics, psychological time value, risk aversion
JEL Classification: C9, D03, D91
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Consumer Response to the Timing of Income: Evidence from a Change in Tax Withholding
-
Household Expenditure and the Income Tax Rebates of 2001
By David Johnson, Jonathan A. Parker, ...
-
Household Expenditure and the Income Tax Rebates of 2001
By David Johnson, Jonathan A. Parker, ...
-
The Reaction of Consumer Spending and Debt to Tax Rebates - Evidence from Consumer Credit Data
By Sumit Agarwal, Chunlin Liu, ...
-
The Reaction of Consumer Spending and Debt to Tax Rebates -- Evidence from Consumer Credit Data
By Sumit Agarwal, Chunlin Liu, ...
-
'3rd of Tha Month': Do Social Security Recipients Smooth Consumption between Checks?
-
Did the 2001 Tax Rebate Stimulate Spending? Evidence from Taxpayer Surveys
-
Is There a Daily Discount Rate? Evidence from the Food Stamp Nutrition Cycle