publication . Preprint . Article . Research . Book . 2009

Expected Net Present Value, Expected Net Future Value, and the Ramsey Rule

Christian Gollier;
Open Access
  • Published: 01 Jun 2009
  • Country: France
Abstract
National audience; Weitzman [1] showed that when future interest rates are uncertain, using the expected net present value implies a term structure of discount rates that is decreasing to the smallest possible interest rate. On the contrary, using the expected net future value criteria implies an increasing term structure of discount rates up to the largest possible interest rate. We reconcile the two approaches by introducing risk aversion and utility maximization. We show that if the aggregate consumption path is optimized and made flexible to news about future interest rates, the two criteria are equivalent. Moreover, they are also equivalent to the Ramsey ru...
Persistent Identifiers
Subjects
free text keywords: discount rate, asset price, Ramsey rule, cost-benefit analysis, DISCOUNT RATE, RAMSEY RULE, CLIMATE CHANGE, COST BENEFIT ANALYSIS, [SHS]Humanities and Social Sciences, Economics and Econometrics, Management, Monitoring, Policy and Law, Discount rate, Ramsey rule, climate change, cost-benefit analysis, D61, asset price, Kosten-Nutzen-Analyse, Dynamische Investitionsrechnung, Abzinsung, Zinsstruktur, Optimale Besteuerung, Theorie, B- ECONOMIE ET FINANCE, jel:D61, Future value, Econometrics, Interest rate, media_common.quotation_subject, media_common, Cost–benefit analysis, Future interest, Utility maximization, Net present value, Economics, Risk aversion, ddc:330
Funded by
EC| LONG-TERM RISKS
Project
LONG-TERM RISKS
Evaluation and management of collective long-term risks
  • Funder: European Commission (EC)
  • Project Code: 230589
  • Funding stream: FP7 | SP2 | ERC
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