Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games under Uncertainty
In a dynamically efficient economy, can a government roll its debt forever and avoid the need to raise taxes? In a series of examples of economies with zero growth, this paper shows that such Ponzi games may be infeasible even when the average rate of return on bonds is negative, and may be feasible even when the average rate of return on bonds is positive. The paper then reveals the structure which underlies these examples.
|Date of creation:||Nov 2001|
|Publication status:||Published in Advances in Macroeconomics, Berkeley Electronic Press (BePress), 2001, 1 (2), pp.1-23|
|Note:||View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01030812|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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