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Generational accounting in open economies

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Author Info

  • Eric O'N. Fisher
  • Ken Kasa

Abstract

Using data on U.S. and Japanese government debt, we calibrate a version of Weil's (1989) model and study the international and intergenerational consequences of recent fiscal policy. Assuming debt/GDP ratios stabilize at current levels, the model implies: (1) the world real interest rate rises by fewer than two basis points; (2) the United States runs small but persistent external deficits; and (3) current generations in the United States experience a slight increase in wealth, while future generations both at home and abroad suffer analogous decreases. Most of the wealth effects are intergenerational rather than international.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (1997)
Issue (Month): ()
Pages: 34-46

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Handle: RePEc:fip:fedfer:y:1997:p:34-46:n:3

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Related research

Keywords: Fiscal policy ; Debts; Public;

References

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  1. Fisher, Eric O'n., 1990. "Sustainable balance of trade deficits," Journal of Monetary Economics, Elsevier, vol. 25(3), pages 411-430, June.
  2. Hans Fehr & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounting in General Equilibrium," NBER Chapters, in: Generational Accounting around the World, pages 43-72 National Bureau of Economic Research, Inc.
  3. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-93, June.
  4. Reuven Glick & Kenneth Rogoff, 1993. "Global Versus Country-Specific Productivity Shocks and the Current Acocount," Boston University - Institute for Economic Development 31, Boston University, Institute for Economic Development.
  5. Gale, David, 1971. "General equilibrium with imbalance of trade," Journal of International Economics, Elsevier, vol. 1(2), pages 141-158, May.
  6. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  7. Judd, Kenneth L, 1985. "Short-run Analysis of Fiscal Policy in a Simple Perfect Foresight Model," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 298-319, April.
  8. Iwata, Kazumasa, 1991. "Budgetary balance, aging, and external balance: The future of the United States-Japan external imbalance," Journal of the Japanese and International Economies, Elsevier, vol. 5(4), pages 473-497, December.
  9. Weil, Philippe, 1989. "Overlapping families of infinitely-lived agents," Journal of Public Economics, Elsevier, vol. 38(2), pages 183-198, March.
  10. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report 102, Federal Reserve Bank of Minneapolis.
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Cited by:
  1. Leachman, Lori L. & Francis, Bill B., 2000. "Multicointegration Analysis of the Sustainability of Foreign Debt," Journal of Macroeconomics, Elsevier, vol. 22(2), pages 207-227, April.

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