14 Jan 2011 A theory the decreasing term structure of discount rates For time horizons longer than 30 years, a forward discount rate of 2% is used2. 1 Oct 2019 Time Horizon and the Discount Rate. Journal of Economic Theory, 107(2): p463- 73. Gollier, C., 2002b. Discounting an uncertain future, Journal revealed discount rate as applying to a time horizon of 6 months. This avoids the potential problem of the subject facing extra risk or transactions costs with the 21 Aug 2014 In Economics and Psychology, some researchers try to measure the concept of time horizon through “future discounting rate/social rate of aversion; income elasticity; time horizon; uncertainty. Correspondence: where r is the discount rate, ρ is the rate of pure time preference, g is the growth rate of. investment in climate change abatement, which involves similar horizons as In particular, discount rates might vary with the horizon of an investment's payoffs. Discount factors. Discount rates. Long term. Specific settings. How to aggregate experts opinions. Impact of stochastic shifts. The classical model. A time horizon
We discuss the selection of the socially efficient discount rate for public investment projects that entail costs and benefits in the far distant future. We show that the discount rate should be a decreasing function of time horizon under some specific restrictions on the distribution of uncertain growth and on preferences. At a 0% real interest rate (i.e. investments keep pace with inflation), the present value of benefits claimed at 62, when the primary insurance amount (PIA) is $30,000 per year, is $652,500. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March. Weitzman, Martin L., 1998. " Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate ," Journal of Environmental Economics and Management , Elsevier, vol. 36(3), pages 201-208, November.
it is very hard (some would even say impossible) to make a reasonable estimate of revenue, income, cash flow, CapEx and discount rate for that time horizon. 21 Jul 2008 also justify a decreasing term structure of the ecological discount rate on economic discount rates should be sensitive to the time horizon. 24 Feb 2018 Time Horizon (Residual Value). Discount Rate (k, WACC). Next, we will see how these variables behave and how they are calculated: The hazard rates over time were calculated and transformed to linear The magnitude of effect of time horizon was flattened with increasing discount rate for
The exogenous growth rate of the economy follows a random walk. We characterize the set of utility functions for which it is efficient to discount more distant cash Using discount rates that are decreasing with the time horizon would reduce the exponential effect of discounting. Before examining the effect of time on the 10 Mar 2000 We discuss the selection of the socially efficient discount rate for public investment projects that entail costs and benefits in the far distant future. In that case, it is socially efficient to reduce the discount rate for longer horizon if and only if relative risk aversion is decreasing with wealth. This hypothesis is Rev. 61(4), 1982 277. DISCOUNT RATES AND TIME HORIZONS. By R. LORRAIN-SMITH*. SUMMARYt. Conventional discounting tables treat future events with If a 10% rate of return is used for discounting, the net present value of the forestry project is -20.128 million, that for industrial investment 50.30 1 million: a Time Horizon and the Discount Rate. Christian Gollier (christian.gollier@tse-fr.eu ). Journal of Economic Theory, 2002, vol. 107, issue 2, 463-473. Date: 2002
14 Jan 2011 A theory the decreasing term structure of discount rates For time horizons longer than 30 years, a forward discount rate of 2% is used2. 1 Oct 2019 Time Horizon and the Discount Rate. Journal of Economic Theory, 107(2): p463- 73. Gollier, C., 2002b. Discounting an uncertain future, Journal revealed discount rate as applying to a time horizon of 6 months. This avoids the potential problem of the subject facing extra risk or transactions costs with the