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Fiscal stabilization rule and overlapping generations

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  • Hiraga, Kazuki

Abstract

Recently important policy debate of both developed and emerging countries is about fiscal sustainability of government deficit. Fiscal authorities want to search for the fiscal stabilization rule that sustains their debt. We investigate how the fiscal stabilization rule sustains the government debt in overlapping generations model. If the fiscal stabilization rule which improves primary balance to an increase of government debt is sufficiently strong, there are two steady states; one is higher capital stock and output and lower government debt, and the other is lower capital stock which satisfies dynamic efficiency and higher government debt.

Suggested Citation

  • Hiraga, Kazuki, 2016. "Fiscal stabilization rule and overlapping generations," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 313-324.
    • Handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:313-324
    DOI: 10.1016/j.iref.2015.12.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal stabilization rule; Overlapping generations model; Sustainability of the government debt;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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