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Fluctuations macroéconomiques et dette publique

Listed author(s):
  • Audrey Desbonnet
  • Sumudu Kankanamge

This paper considers the impact of macroeconomic fluctuations on the optimal level of public debt. Households are subject to both aggregate and idiosyncratic risk and insurance market imperfectness prevents them from from fully insuring against risk. We find that the optimal level of public debt is significantly higher in a setting embedding macroeconomic fluctuations than in a simpler idiosyncratic risk framework. Macroeconomic fluctuations modify both the cost and the motive for precautionary saving. Public debt by effectively reducing the cost of precautionary saving help agents to smooth consumption when they face price and employment fluctuations. Classification JEL : E32, E63, H31.

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Article provided by Presses de Sciences-Po in its journal Revue économique.

Volume (Year): 59 (2008)
Issue (Month): 3 ()
Pages: 583-593

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Handle: RePEc:cai:recosp:reco_593_0583
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