Varying Issuance in a Repeated Model of the International Monetary System with Hyperbolic Discounting

This article proposes a repeated model of the international monetary system, where Hegemon’s issuance varies across time. The discount factor is a standard specification of hyperbolic discounting in economics and psychology literature (e.g., Loewenstein & Prelec, 1992, The Quarterly Journal of Economics , 107 , 573–597). Like the repeated model proposed by Farhi and Maggiori (2018, The Quarterly Journal of Economics , 133 , 295–355), which is further discussed by Wang and Worrall (2025a, A repeated model of the international monetary system without direct default costs , School of Economics, University of Edinburgh; 2025b, Finance Research Letters , 86 , 108410), the safe asset issuance is determined by a no-default condition and the safe asset issuance is constant overtime. However, unlike the repeated model with a common discount factor or a quasi-hyperbolic discounting like Laibson (1998, European Economic Review , 42 , 861–871), the article shows that in my model, there are two no-default conditions and the Hegemon can optimally issue safe assets that vary across time. JEL Codes: E42, E44, F3, F55, G15