Debt, deficits and finite horizons: the stochastic case
We introduce aggregate uncertainty and complete markets into Blanchard's (1985) perpetual youth model. We show how to construct a simple formula for the pricing kernel in terms of observable aggregate variables. We study a pure trade version of our model and we show it behaves much like the two-period overlapping generations model. Our methods are easily generalized to economies with production and they should prove useful to researchers who seek a tractable stochastic model in which fiscal policy has real effects on aggregate allocations.
|Date of creation:||2009|
|Date of revision:|
|Note:||View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00439336/en/|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olivier J. Blanchard, 1984.
"Debt, Deficits and Finite Horizons,"
NBER Working Papers
1389, National Bureau of Economic Research, Inc.
- Giovanni Ganelli, 2002.
"The New Open Economy Macroeconomics of Government Debt,"
Trinity Economics Papers
200214, Trinity College Dublin, Department of Economics.
- Ganelli, Giovanni, 2005. "The new open economy macroeconomics of government debt," Journal of International Economics, Elsevier, vol. 65(1), pages 167-184, January.
- Ganelli, Giovanni, 2003. "The New Open Economy Macroeconomics of Government Debt," Royal Economic Society Annual Conference 2003 83, Royal Economic Society.
- Dirk Muir & Douglas Laxton & Dennis P. J. Botman & Andrei Romanov, 2006. "A New-Open-Economy Macro Model for Fiscal Policy Evaluation," IMF Working Papers 06/45, International Monetary Fund.
- Ganelli, Giovanni, 2003.
"Useful government spending, direct crowding-out and fiscal policy interdependence,"
Journal of International Money and Finance,
Elsevier, vol. 22(1), pages 87-103, February.
- Ganelli, G., 2000. "Useful Government Spending, Direct Crowding Out and Fiscal Policy Interdependence," The Warwick Economics Research Paper Series (TWERPS) 547, University of Warwick, Department of Economics.
- Fabio Ghironi, 2000.
"Macroeconomic Interdependence under Incomplete Markets,"
Boston College Working Papers in Economics
471, Boston College Department of Economics, revised 07 Feb 2003.
- Ghironi, Fabio, 2006. "Macroeconomic interdependence under incomplete markets," Journal of International Economics, Elsevier, vol. 70(2), pages 428-450, December.
- Barro, Robert J, 1974.
"Are Government Bonds Net Wealth?,"
Journal of Political Economy,
University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00439336. 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: (CCSD)
If references are entirely missing, you can add them using this form.