Theoretical and Empirical Study of Time Preference: Iranian Economy (1351-81)

In this study, the rate of time preference as the most important origin of interest is studied. It is firstly examined from the view point of its determinants and then the affected factors from time preference will be considered. Results show that the most important affected variable is saving rate, so that the higher the rate of time preference is the lower the optimal saving rate. This can be explained by the fact that the high the time preference the more distance one takes in his allocation choice from rational norm. We also claim that time preference can not provided enough bases for existent of market rate of interest. This variable have been examined for Iranian economy with Structural Equations, Multiple Indicator Multiple Indicator Cause model (MIMIC) for period of 1351-81. The results also show that increase in time preference rate decreases private investment intensively.