Discounting the distant future: How much does model selection affect the certainty equivalent rate?
نویسندگان
چکیده
منابع مشابه
Discounting the Distant Future: How Much Do Uncertain Rates Increase Valuations?
Costs and benefits in the distant future—such as those associated with global warming, long-lived infrastructure, hazardous and radioactive waste, and biodiversity—often have little value today when measured with conventional discount rates. We demonstrate that when the future path of this conventional rate is uncertain and persistent (i.e., highly correlated over time), the distant future shou...
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Costs and benefits in the distant future have little consequence today when valued with conventional discount rates. This is particularly relevant for assessing policies with effects hundreds of years in the future, such as mitigating the damages from global warming. Many authors and analysts have responded by arguing for the use of lower discount rates over longer horizons, based primarily on ...
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Data on certainty equivalent discount factors and discount rates for stochastic interest rates in Australia are provided in this paper. The data has been used for the analysis of investments into climate adaptation projects in ׳It׳s not now or never: Implications of investment timing and risk aversion on climate adaptation to extreme events׳ (Truong and Trück, 2016) [3] and can be used for othe...
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In a recent paper, Newell and Pizer (2003) (N&P) build upon Weitzman (1998, 2001) and show how uncertainty about future interest rates leads to ‘certainty equivalent’ forward rates (CER) that decline with the time horizon. Such Declining Discount Rates (DDR’s) have important implications for the economic appraisal of the long-term policy arena (e.g. climate change) and inter-generational equity...
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ژورنال
عنوان ژورنال: Journal of Applied Econometrics
سال: 2007
ISSN: 0883-7252,1099-1255
DOI: 10.1002/jae.937