Journal article Open Access

Expected net present value, expected net future value, and the Ramsey rule

GOLLIER, Christian


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  <identifier identifierType="URL">https://zenodo.org/record/893</identifier>
  <creators>
    <creator>
      <creatorName>GOLLIER, Christian</creatorName>
      <givenName>Christian</givenName>
      <familyName>GOLLIER</familyName>
      <affiliation>FONDATION JEAN-JACQUES LAFFONT,TOULOUSE SCHOOL OF ECONOMICS</affiliation>
    </creator>
  </creators>
  <titles>
    <title>Expected net present value, expected net future value, and the Ramsey rule</title>
  </titles>
  <publisher>Zenodo</publisher>
  <publicationYear>2010</publicationYear>
  <subjects>
    <subject>Discount rate</subject>
    <subject>Ramsey rule</subject>
    <subject>climate change</subject>
    <subject>cost-benefit analysis</subject>
  </subjects>
  <dates>
    <date dateType="Issued">2010-03-01</date>
  </dates>
  <language>en</language>
  <resourceType resourceTypeGeneral="Text">Journal article</resourceType>
  <alternateIdentifiers>
    <alternateIdentifier alternateIdentifierType="url">https://zenodo.org/record/893</alternateIdentifier>
  </alternateIdentifiers>
  <relatedIdentifiers>
    <relatedIdentifier relatedIdentifierType="DOI" relationType="IsIdenticalTo">10.1016/j.jeem.2009.11.003</relatedIdentifier>
    <relatedIdentifier relatedIdentifierType="URL" relationType="IsPartOf">https://zenodo.org/communities/ecfunded</relatedIdentifier>
    <relatedIdentifier relatedIdentifierType="URL" relationType="IsPartOf">https://zenodo.org/communities/zenodo</relatedIdentifier>
  </relatedIdentifiers>
  <rightsList>
    <rights rightsURI="info:eu-repo/semantics/openAccess">Open Access</rights>
  </rightsList>
  <descriptions>
    <description descriptionType="Abstract">Weitzman (1998) 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 rule extended to uncertainty.</description>
  </descriptions>
  <fundingReferences>
    <fundingReference>
      <funderName>European Commission</funderName>
      <funderIdentifier funderIdentifierType="Crossref Funder ID">10.13039/501100000780</funderIdentifier>
      <awardNumber awardURI="info:eu-repo/grantAgreement/EC/FP7/230589/">230589</awardNumber>
      <awardTitle>Evaluation and management of collective long-term risks</awardTitle>
    </fundingReference>
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