The model is designed so that financial markets and borrowers share exactly the same discount factor
and, to prevent strategic forces that pitch holders of different maturities against each other, I look at the case of a single bond.
The notional rate equals zero when the discount factor
is 0.61% above its steady state.
(2) By focusing on real government debt, this article abstracts from the discount factor
channel, through which central banks can affect fiscal limits by influencing real interest rates and thus the discount factor
If the discount factor
is such that 0.88 < [delta] < 0.94, the incentive policy is still preferred as long as the distribution of the bargaining powers is not too asymmetric.
We expect that the higher the discount factor
, the more the parents are likely to show tough love.
Assuming (contrary to common sense), that the discount factor
is greater than 1, one can obtain risk premium a little higher than 1%, but only for a rather high risk-free rate.
Next, we examine the effect of different number of SUs n on the total throughput between the proposed DDCPC algorithm under different discount factor
r and DCPC algorithm as depicted in Fig.
The two types are now distinguished by their subjective discount factors
, with [[delta].sub.[tau],t] being the discount factor
of type-[tau] households between time t and t+1.
They call such rates the "certainty-equivalent rate." The certainty-equivalent rate will fall as the time period increases because the discount factors
for higher rates fall more quickly with time and the lowest rate has more relative effect.
He shows that a symmetric optimal penal code yields the lowest critical discount factor
such that collusion can be sustained.
According to this theory, three variables can affect asset prices: the discount factor
, the dividend payment, and the expected future price appreciation.
where [E.sub.t] denotes the expectations at the end of period t; [beta], the discount factor
; and [w.sub.t], the real wage per hour worked.