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Generational accounting in open economies

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  • 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.

Suggested Citation

  • Eric O'N. Fisher & Ken Kasa, 1997. "Generational accounting in open economies," Economic Review, Federal Reserve Bank of San Francisco, pages 34-46.
  • Handle: RePEc:fip:fedfer:y:1997:p:34-46:n:3
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    References listed on IDEAS

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    1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
    2. Glick, Reuven & Rogoff, Kenneth, 1995. "Global versus country-specific productivity shocks and the current account," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 159-192, February.
    3. 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.
    4. 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.
    5. 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.
    6. Gale, David, 1971. "General equilibrium with imbalance of trade," Journal of International Economics, Elsevier, vol. 1(2), pages 141-158, May.
    7. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-247, April.
    8. Rosenberg, Alexander, 1992. "Economics--Mathematical Politics or Science of Diminishing Returns?," University of Chicago Press Economics Books, University of Chicago Press, number 9780226727233.
    9. Fisher, Eric O'n., 1990. "Sustainable balance of trade deficits," Journal of Monetary Economics, Elsevier, vol. 25(3), pages 411-430, June.
    10. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-293, June.
    11. Weil, Philippe, 1989. "Overlapping families of infinitely-lived agents," Journal of Public Economics, Elsevier, vol. 38(2), pages 183-198, March.
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    Cited by:

    1. repec:red:issued:17-49 is not listed on IDEAS
    2. Mark A. Roberts, 2013. "Pareto-improving pension reform through technological implementation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(3), pages 317-342, July.
    3. 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.
    4. Christian vom Lehn & Eric Fisher & Aspen Gorry, 2018. "Male Labor Supply and Generational Fiscal Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 121-149, April.

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    Keywords

    Fiscal policy ; Debts; Public;

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