Debt Policy under Fixed and Flexible Prices
The effects of an increase in the stock of government bonds are considered in an economy wit h overlapping generations and perfect foresight, and in the absence of intergene rational bequests. The cases where prices adjust instantaneously to clear market s and whereprices are exogenously fixed, are contrasted (1) in a model with cap ital accumulation but an exogenous labor supply and (2) in a model with exogenou s capital but endogenous labor supply. James Tobin's intuitive argument that, in the absence of bequests, higher debt reduces long-run welfare if prices are fle xible, but increases it iffixed, so producing Keynesian unemployment, is correc t for (1) but incorrect for (2) at high levels of employment. Copyright 1986 by Royal Economic Society.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 38 (1986)
Issue (Month): 3 (November)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:38:y:1986:i:3:p:481-500. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.