Generational accounting in open economies
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.
Volume (Year): (1997)
Issue (Month): ()
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