The use of a Declining Discount Rate (DDR), in cost-benefit analysis (CBA), compared to the use of a Constant Discount Rate, implies that the policy maker will put relatively more effort to improve social welfare in the far distant future than in the shorter time. The choice between the two discount rates is crucial and linked, for example, to the problem of whether we should fight malaria and ...

David Andolfatto is a professor of economics at the the University of Waterloo and the University of Western Ontario. Paul Gomme is an economic advisor at the Federal Reserve Bank of Cleveland. Both authors are members of the Centre for Research on Economic Fluctuations and Employment in Montreal, Canada. They thank LutzAlexander Busch, Gordon Myers, and Ed Nosal for helpful comments and critic...

I show that adding an overlapping generations structure to the canonical New Keynesian model can generate optimal inflation rate is significantly positive. In a baseline calibration of model, target comprised between 0.8% and 3.2% in annual terms. this framework, deviations from long-run price stability are because at which firms discount future profit flows naturally differs planner discounts ...

Discount rates are often used in cost-benefit analysis. Whenever costs and benefits for a household or individual are spread over time, it is essential that one calculate present-value equivalents in order to undertake meaningful comparisons. In most cases welfare analysts use market rates as the basis for these present-value calculations. Sensitivity analysis often consists of varying the scal...

We estimate discount rates of 555 subjects using a laboratory task and find that these individual discount rates predict inter-individual variation in field behaviors (e.g., exercise, BMI, smoking). The correlation between the discount rate and each field behavior is small: none exceeds 0.28 and many are near 0. However, the discount rate has at least as much predictive power as any variable in...