Dear Community,
I applied the “endogenous discount factor - fix” to induce stationarity as suggested by Schmitt-Grohe, Uribe (2002). I have however difficulties with the economic intuition behind the concept. As Blanchard and Fischer (1999: 73) put it: “The assumption [of EDF] is difficult to defend a priori; indeed, we usually think it is the rich who are more likely to be patient.”
Now I wonder whether EDFs are often used and how their application is reasoned for. Could somebody point me towards a helpful piece of literature that provides some intuition or simply communicate the latter directly? That would be interesting.
Thanks!