Inter-temporal rate of substitution
Reading 55 - Economics and Investment Markets
Question about ITRS – the text says that an investor is willing to pay less (i.e. ITRS is relatively lower) for a bond during good economic times. Can someone explain why?
My intuition is that ITRS should be relatively higher, since the marginal utility of consumption today is lower during good times, and ITRS = Marginal utility of consumption in the future/ Marginal utility of consumption today.