Temporary transfers in a simple dynamic general equilibrium model

Abstract

The main result of this paper is to demonstrate that if future discounting is sufficiently weak, a temporary transfer of commodities has almost no effects on current economies. Although it is well known in the macroeconomic literature, this proposition has not been given any rigorous proof that takes the dynamic general equilibrium effect of a transfer into account. This study builds a simple dynamic general equilibrium model with two goods and demonstrates that the proposition can be derived from the equilibrium conditions of perfect foresight equilibrium.