1. bookVolume 17 (2022): Issue 1 (April 2022)
Journal Details
License
Format
Journal
eISSN
2344-5416
First Published
06 Mar 2015
Publication timeframe
3 times per year
Languages
English
access type Open Access

Investigation of the Role of Change in Utility Function Components and Its Effect on Smooth the Dynamic Movement Path of Model Variables

Published Online: 31 May 2022
Volume & Issue: Volume 17 (2022) - Issue 1 (April 2022)
Page range: 73 - 84
Journal Details
License
Format
Journal
eISSN
2344-5416
First Published
06 Mar 2015
Publication timeframe
3 times per year
Languages
English
Abstract

This paper attempts to present a model that can investigate and compare the effect of utility change on the dominant economy by defining different utility functions for households in which they perform to smooth their consumption paths in each period by using debt. To this end, this research with a glance at the existing economic literature will present a dynamic stochastic general equilibrium model for a small open economy for two countries in which, while diversifying the variables affecting the utility function, the government pays and finances its deficit despite the debt in Budget constraint. The results of the comparison of the two models indicate that in periods of low productivity, the country’s policy is to reduce or export debt which can minimize the consumption reduction. Also, despite the international interest rate in the model the consumption and capital accumulation are reduced to keep pace with the interest rate that the intensity of which depends on the utility function. Finally, it can be said that despite the different utility function, the investor diversifies his risk or his investment portfolio to escape the investment risk.

Keywords

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