IDEAS home Printed from https://ideas.repec.org/a/aea/apandp/v110y2020p149-51.html
   My bibliography  Save this article

Simulating the Blanchard Conjecture in a Multiperiod Life Cycle Model

Author

Listed:
  • Jasmina Hasanhodzic

Abstract

In recent writings, Olivier Blanchard has suggested that when the safe rate on government debt is less that the economy's growth rate, additional deficit-financed US federal spending would come at no cost to any future generation and benefits to some. This paper studies this question in a ten-period OLG CGE model with aggregate risk, whose safe rate averages -2 percent annually and growth rate is 0. It shows that welfare losses to future generations resulting from the introduction of pay-go social security, financed with a 15 percent payroll tax, are roughly 20 percent measured as a compensating variation relative to no policy.

Suggested Citation

  • Jasmina Hasanhodzic, 2020. "Simulating the Blanchard Conjecture in a Multiperiod Life Cycle Model," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 149-151, May.
    • Handle: RePEc:aea:apandp:v:110:y:2020:p:149-51
    DOI: 10.1257/pandp.20201105
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/pandp.20201105
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/pandp.20201105.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/pandp.20201105?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eduardo Levy Yeyati & Federico Sturzenegger, 2023. "A balance‐sheet approach to fiscal sustainability," Fiscal Studies, John Wiley & Sons, vol. 44(1), pages 61-84, March.
    2. Federico Sturzenegger & Nicolás Der Meguerditchian, 2022. "A Balance-Sheet Model of Fiscal Policy in Namibia," Working Papers 136, Red Nacional de Investigadores en Economía (RedNIE).
    3. Michael Falkenheim, 2022. "The Welfare Effects of Debt: Crowding Out and Risk Shifting: Working Paper 2022-10," Working Papers 58849, Congressional Budget Office.

    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:apandp:v:110:y:2020:p:149-51. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.