6. Irving Fisher's Impatience Theory of Interest

Financial Theory (ECON 251)

Building on the general equilibrium setup solved in the last week, this lecture looks in depth at the relationships between productivity, patience, prices, allocations, and nominal and real interest rates. The solutions to three of Fisher's famous examples are given: What happens to interest rates when people become more or less patient? What happens when they expect to receive windfall riches sometime in the future? And, what happens when wealth in an economy is redistributed from the poor to the rich?

00:00 - Chapter 1. From Financial to General Equilbrium
06:44 - Chapter 2. Applying the Principle of No Arbitrage
23:50 - Chapter 3. The Fundamental Theorem of Asset Pricing
39:25 - Chapter 4. Effects of Technology in Fisher Economy
51:31 - Chapter 5. The Impatience Theory of Interest
01:06:48 - Chapter 6. Conclusion

Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses

This course was recorded in Fall 2009.