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Riedel, Frank
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Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 1999,23
The influence of heterogeneous time preferences on the term structure is investigated. Motivated by the Preferred Habitat Theory of Modigliani and Sutch, a model for intertemporal preferences accounting for preferred habitats is proposed. In a heterogeneous world, preferred habitats can explain humps in the yield curve. Agents with a long habitat prefer long term bonds to shorter instruments as the Preferred Habitat Theory predicts.
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Working Paper

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