Index
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additive model
additive time preferences
Allais, M.
Allais’ paradox
ambiguity aversion: maxmin; smooth
ambiguity prudence effect
anticipatory feelings
Arrow, K. J.
Arrow-Debreu securities
Arrow-Lind theorem
Arrow-Pratt approximation
Asheim, G. B.
asset pricing: capital asset pricing model (CAPM); classical equilibrium formula for; consumption-based capital asset pricing model (CCAPM); evaluation of risky projects (see also risky projects/risk premium)
autoregressive model
Aydede, S. K.
bandit problem
Bansal, R.
Barro, R. J.
Baumol, William
Baumstark, Luc
Bayes rule
Bernoulli-von Neumann-Morgenstern expected utility theory. See also von Neumann-Morgenstern expected utility theory
Black, F.
Bolton, P.
Bommier, A.
Boyer, J.
Broome, J.
Brownian motion, discrete version of
business cycles, economic growth and
cake-sharing rule
capital: continuously compounded rate of return on; opportunity cost of; rate of return on marginal productive; rate of return on risk-free
capital asset pricing model (CAPM)
CBA. See cost-benefit analysis
CCAPM. See consumption-based capital asset pricing model
Cecchetti, S. G.
certainty equivalent
China
Clark, G.
climate change: concerns regarding; discount rate applied to; global inequality and; non-marginal project, example of; precautionary principle at the Rio conference; risk assessment and
Club of Rome
Cochrane, J. H.
compensating risk premium
concordance and supermodularity
Constantinides, G.
consumption: accounting for optimal under the Weitzman argument; estimating the growth rate of; intergenerational habit formation and; uncertainty about in the distant future
consumption-based capital asset pricing model (CCAPM)
consumption habits
continuously compounded rates
Copenhagen Consensus
correlation aversion
correlation effect
cost-benefit analysis (CBA)
Cox, J.
Cropper, M. L.
cross-prudence in consumption effect
cumulative prospect theory
DARA. See decreasing absolute risk aversion
decision criteria; discounted expected utility (DEU) model; intergenerational habit formation; maxmin ambiguity aversion; option value (see option value); recursive expected utility; smooth ambiguity aversion
decreasing absolute ambiguity aversion
decreasing absolute risk aversion (DARA)
decreasing term structure, theory of; current long discount rate and future short discount rates, relationship of; decreasing term structure; forward discount rate, effect of an increase in concordance of economic growth on; iid dynamic growth process, case of
DEU model. See discounted expected utility model
Diamond, Jared
Diamond, P.
Dietz, S.
diminishing expectations
Dimson, E.
disasters. See extreme events
discounted expected utility (DEU) model. See also decision criteria
discount rate; alternative bases for estimating; current long and future short, relationship of; decreasing term structure, theory of (see decreasing term structure, theory of); definition of; ecological (see ecological discount rate); efficient; level of; models, need for in estimating; for non-marginal projects (see non-marginal projects); rate of impatience and, distinction between; risk-adjusted; in a simple two-period model; term structure of (see term structure of the discount rate); three different ways to estimate; time horizons and; wealth effect, justified by (see also wealth effect)
Dixit, A. K.
downside risk aversion
Drèze, J. H.
ecological discount rate; analytical solution to estimating; calibrating the model; CES utility functions, examination of; determinants of; economic discount rate and; evaluating nonfinancial benefits; parametric uncertainty and; simple model of
ecological growth effect
ecological prudence effect
economic growth: convergence, impact of; convergence of and the discount rate; environmental quality and; extreme events in the history of (see extreme events); forward discount rate, effect of an increase in concordance on; mean-reversion and; parametric uncertainty regarding the history of (see parametric uncertainty); as random walk (see random walk); serial correlation in, impact on the forward interest rate of; two-state Markov model of; wealth inequality and the discount rate, impact on
Eeckhoudt, L.
efficient discount rate. See discount rate
Ellsberg, D.
Emmerling, J.
endogenous growth theory
environmental assets, accounting for. See ecological discount rate
Environmental Sustainability Index (Yale Center for Environmental Law and Policy)
Epstein, L. G.
equity and bonds, annualized returns on
equity premium
equity premium puzzle
expected net future value (NFV) approach
expected net present value (NPV) approach. See also Weitzman argument
exponential psychological discounting
extended Ramsey rule: as an approximation; calibration of using cross-section data; calibration of using time series data; constant discount rate from the case of normal distribution; in the lognormal case
extreme events: numerical illustrations of the two-state Markov model; parametric uncertainty and (see parametric uncertainty); persistent shocks, effect on discount rate if economic growth is subject to (two-state Markov process); possibility of; random walk, effect on discount rate if economic growth is
financial markets: socially responsible investments; use of to determine the discount rate
First-order Stochastic Dominance (FSD)
Fisher, A. C.
France: discount rate recommended in; discount rate, recent changes in; extended Ramsey rule, calibration of using time series; precautionary effect in; returns on equity and the equity premium; risk-sensitive discount rate recommended in
Frederick, S.
FSD, First–order Stochastic Dominance
Gamma distribution
Germany
Gierlinger, J.
Gilboa, I.
Gollier, C.
Government Accounting Standards Board (GASB)
government bonds, rates of return on
Green Book
Groom, B.
growth rate. See economic growth
Guéant, O.
Guesnerie, R.
Guiso, L.
Hall, R. E.
Hammitt, J. K.
Hansen, L.
Harris, C.
Harrod, R. F.
Heinzel, C.
Henry, C.
Hepburn, C.
historical rates of return
Hoel, M.
Hope, C.
Hyperbolic discounting
impatience: assumption and modeling of; effect in the extended Ramsey rule; rate of
independence axiom
indirect utility function approach
inequalities; economic convergence; economy in the model, description of; inefficient risk sharingin an “egalitarian” investment project; long-term risk-sharing allocations in the classical model, epitaph for; representative agent in the model, existence of; utility function of the representative agent, characterization of; valuation of projects that reduce; of wealth (see wealth inequality)
inequality premium
Ingersoll, J.
interest rates: continuously compounded; discount rate and; equilibrium forward; in a simple two-period model; term structure of
intergenerational habit formation
intergenerational perspectives/welfare; rate of impatience and. See also economic growth
Intergovernmental Panel on Climate Change
internal rate of return
intertemporal inequality of consumption: aversion to; relative aversion to
intertemporal social welfare
Italy
Japan
Jappelli, T.
Johansson-Stenman, O.
Kahneman, D.
Keller, G.
Keynes, J. M.
Kimball, M. S.
Klibanoff, P.
Kocherlakota, N. R.
Koopmans, T. C.
Koundouri, P.
Kreps, D. M.
Krüger, Ph.
Lam, P.-S.
Landier, A.
Laos
Lasry, J.-M.
Layard, Richard
Leamer, E. E.
Lebègue, Daniel
Lebègue Report
Lehmann, E. L.
Leland, H. E.
lemma 1; proof of
lemma 2
Liberia
“Limits to Growth, The” (Club of Rome)
Lind, R. C.
List, J. A.
Loewenstein, G.
Lomborg, Bjorn
Lucas, R.
Malinvaud, E.
Malthus’ Law
marginal-preserving increase in concordance (MPIC)
Marinacci, M.
Mark, N. C.
Markov switches
Marsh, P.
maxmin ambiguity aversion
McDonald, R.
mean-reversion
Meyer, M.
Millimet, D. L.
Modigliani, F.
Modigliani-Miller’s Theorem
MPIC. See marginal-preserving increase in concordance
Mukerji, S.
mutuality principle
net future value (NFV). See also expected net future value; Weitzman argument
net present value (NPV); net future value and; as standard valuation approach. See also expected net present value
Newell, R.
NFV. See net future value
non-marginal projects: evaluation error and the discount rate; evaluation error and the risk premium; evaluation of; the size-adjusted efficient discount rate
non-monetary benefits, accounting for. See ecological discount rate
Nordhaus, W. D.
NPV. See net present value
O’Donoghue, T.
Office of Management and Budget, U.S. (OMB)
opportunity cost: of capital; discount rate and; of risk-free capital
optimal consumption plan
option value; learning in the Poisson bandit problem; numerical example of; optimal investment strategy in the Poisson bandit problem
Overlapping Generations models (OLG)
Panopoulou, E.
Pantelidis, T.
parametric uncertainty; ecological discount rate, in estimating the; random walk, when the growth process is; unknown trend, when the growth process involves; unknown volatility, when the growth process involves
Patmore, N.
Pearce, D.
pension liabilities, state discount rate on
Persson, M.
peso problem
pessimism effect
Pindyck, R. S.
Pizer, W.
Pleeter, S.
Pomeranz, K.
Porteus, E. L.
Portney, P. R.
positive quadrant dependence
power utility function
precautionary effect: ecological prudence effect and; recursive expected utility and
precautionary principle
precautionary saving
Prelec, D.
prudence: downside risk aversion and; increase in concordance and; precautionary saving and. See also risk aversion
Pure Expectations Hypothesis
Rady, S.
Ramsey, F. P.
Ramsey rule; discount rate in the United Kingdom and; extended (see extended Ramsey rule); formula of; growth rate of consumption and; quantitative implications of; wealth inequality and; Weitzman argument and; welfare-preserving rate of return of saving and (see also welfare-preserving rate of return of saving)
random walk: extreme events and assumption of; growth rate of the economy as; parametric uncertainty, as a special case of
rate of impatience
Rawls, John
recursive expected utility
reinvestment risk
relative aversion to intertemporal inequality of consumption
Rey, B.
Richard, S. F.
risk: competitive allocation of, inequalities and; a decision criterion under; inefficient sharing of; long-term international risk-sharing, epitaph for; macroeconomic; precautionary saving and; variation in, discount rates and; Weitzman argument and
risk-adjusted discount rate
risk aversion; ambiguity aversion, distinguished from; in the case of iid dynamic growth process; decreasing absolute (DARA); downside; expected net future value approach and. See also prudence
risk-free rate puzzle
risk-neutral probability
risk tolerance
risky projects/risk premium; the Arrow-Lind theorem; certainty equivalent and; the consumption-based capital asset pricing model; the equity premium; evaluation error for non-marginal products; evaluation of; the risk-adjusted discount rate and; solution to the equity premium puzzle; valuation of, investors and; valuation of the macroeconomic risk and the equity premium
Robinson, L. A.
“roll-over” strategy
Ross, S.
Rothschild, M.
Samuelson, P. A.
savings: precautionary motive for; uncertainty over future income and; welfare-preserving rate of return on
Schlesinger, H.
Schmeidler, D.
Scholes, M.
Segal, U.
Selden, L.
Sidgwick, H.
Siegel, D.
Singleton, K.
Smith, Adam
smooth ambiguity aversion
socially efficient discount rate. See discount rate
Solow, R.
Spivak, A.
Staunton, M.
Stengos, T.
Stern, N.
Sterner, T.
Stern Review
Strotz, R. H.
Strulovici, B.
Student-t distribution
substitution effect
supermodularity
sustainability, uncertainty about the future and
Tanny, S. M.
Tchen, A. H.
Terlizzese, D.
term structure of the discount rate: decreasing and time consistency; determinants of; diminishing expectations and; economic convergence and; extreme events and (see extreme events); flat; mean-reverting growth process and; parametric uncertainty and (see parametric uncertainty); random walk and analysis of; uncertainty, long-lasting effects of; unified theory of (see decreasing term structure, theory of); Weitzman argument and
term structure of the ecological discount rate
Thesmar, D.
time consistency
time horizons: declining term structure, Weitzman’s argument for; diminishing expectations and; the discount rate and different; extreme events and (see also extreme events); flat term structure and; long-term risk-sharing allocations and
Tol, R. S. J.
Townsend, R. M.
Traeger, C. P.
Treich, N.
Tversky, A.
“two-armed bandit” problem
two-period model; additive time preferences, assumption regarding; discount rate in; economy described; graphical representation of; interest rate in; optimal consumption plan
two-state Markov model: numerical illustrations of; statement of; unified theory of decreasing term structure and
Ulph, D.
uncertainty: about consumption; ambiguity aversion (see ambiguity aversion); the discount rate under; long-lasting effects of; parametric (see parametric uncertainty); random walk in the growth rate and; valuing environmental assets, as a problem for. See also risk
United Kingdom: discount rate, recent changes in; discount rate recommended in; extended Ramsey rule, calibration of using time series; precautionary effect in
United States: extended Ramsey rule, calibration of using time series; precautionary effect in; recent changes in the discount rate in; returns on equity and the equity premium; short-term real interest rates in
Vasicek, O.
veil of ignorance
von Neumann-Morgenstern expected utility theory. See also Bernoullivon Neumann-Morgenstern expected utility theory
WACC. See Weighted Average Cost of Capital
Warner, J. T.
wealth effect; ecological growth effect and; as economic justification for discounting; recursive expected utility and
wealth inequality, impact on the efficient discount rate of
Weighted Average Cost of Capital (WACC)
Weikard, H.-P.
Weil, P.
Weitzman, M. L.
Weitzman argument: logarithmic utility function, the case of; optimality of consumption growth, accounting for; positive expected net present value vs. positive expected net future value; risk and time, accounting for preferences regarding; term structure of discount rates under
welfare-preserving rate of return of saving: additive time preferences assumption and; Ramsey rule and (see also Ramsey rule); rate of impatience and
Wilson, R.
World Bank
Yaron, A.
Zaire
Zhu, X.
Zin, S.
Zuber, S.