Pareto Weights as Wedges in Two-Country Models

34 Pages Posted: 7 Dec 2015

See all articles by David K. Backus

David K. Backus

NYU Stern School of Business; National Bureau of Economic Research (NBER)

Chase Coleman

New York University (NYU) - Leonard N. Stern School of Business

Axelle Ferriere

European University Institute

Spencer Lyon

New York University (NYU) - Leonard N. Stern School of Business

Date Written: December 2015

Abstract

In models with recursive preferences, endogenous variation in Pareto weights would be interpreted as wedges from the perspective of a frictionless model with additive preferences. We describe the behavior of the (relative) Pareto weight in a two-country world and explore its interaction with consumption and the real exchange rate.

Suggested Citation

Backus, David K. and Coleman, Chase and Ferriere, Axelle and Lyon, Spencer, Pareto Weights as Wedges in Two-Country Models (December 2015). NBER Working Paper No. w21773. Available at SSRN: https://ssrn.com/abstract=2700002

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Chase Coleman

New York University (NYU) - Leonard N. Stern School of Business ( email )

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Axelle Ferriere

European University Institute ( email )

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Italy

Spencer Lyon

New York University (NYU) - Leonard N. Stern School of Business ( email )

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New York, NY
United States

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