Monetary Policy When Preferences Are Quasi-Hyperbolic

Wed, 01 Jan 2025 00:00:00 +0000

Research question and motivation: Experimental and survey evidence robustly documents “present bias” — people are more impatient over the short run than the long run, producing preference reversals inconsistent with standard exponential discounting. Dennis and Kirsanov ask how this behavioral feature, modeled as quasi-hyperbolic (quasi-geometric) discounting, changes the optimal conduct of monetary policy. Prior macro work on quasi-hyperbolic discounting concentrated on growth models, consumption/saving, and multiple equilibria; almost none examined monetary policy. The paper fills this gap.

Oleg Kirsanov | Macro Paper Warehouse

Monetary Policy When Preferences Are Quasi-Hyperbolic