The Economic Effects of Restrictions on Government Budget Deficits: Imperfect Privte Credit Markets
We consider a pure-exchange overlapping-generations model We consider a pure-exchange overlapping-generations model with many consumers per generation and many goods per period. As in Ghiglino and Shell (2000), there is a government that collects taxes, distributes transfers and faces budget deficit restrictions. We introduce, for realism and symmetry with the government, imperfection in the private credit markets. We find that with constraints on individual credit and anonymous (i.e., non-personalized) lump-sum taxes, strong (or 'global') irrelevance of the government budget deficit is not possible, and weak irrelevance can hold only in very special situations. With credit constraints and anonymous consumption taxes, weak irrelevance holds provided the number of tax instruments is sufficiently large and at least one consumer's credit constraint is not binding.
|Date of creation:||Aug 2001|
|Contact details of provider:|| Postal: 402 Uris Hall, Ithaca, NY 14853|
Phone: (607) 255-9901
Fax: (607) 255-2818
Web page: http://www.arts.cornell.edu/econ/CAE/workingpapers.html
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ecl:corcae:01-11. 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: ()
If references are entirely missing, you can add them using this form.