Maximum sustainable government debt in the overlapping generations model
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Maximum sustainable government debt in the overlapping generations model

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Published by University of Warwick, Department of Economics in Coventry .
Written in English


Book details:

Edition Notes

StatementNeil Rankin and Barbara Roffia.
SeriesEconomic research paper series / University of Warwick, Department of Economics -- no.521, Economic research paper (University of Warwick, Department of Economics) -- no.521.
ContributionsRoffia, Barbara.
ID Numbers
Open LibraryOL18066540M

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Downloadable (with restrictions)! The theoretical determinants of maximum sustainable government debt are investigated using Diamond's overlapping-generations model. A level of debt is defined to be 'sustainable' if a steady state with non-degenerate values of economic variables exists. We show that a maximum sustainable level of debt almost always exists.   The recent dramatic rise of government deficits in most advanced countries to counter the effects of the global financial crisis arouses renewed interest for one of the perennial topics of fiscal policy: the sustainability of government debt. This paper explores maximum sustainabile debt in a two-good, two-country overlapping generations (OLG) model and Cited by: The theoretical determinants of maximum sustainable government debt are investigated using Diamond’s overlapping-generations model. A level of debt is defined to be ‘sustainable’ if a steady state with non-degenerate values of economic variables exists. We show that a maximum sustainable level of debt almost always exists. Most interestingly, it normally occurs at a . Rankin N, Roffia B () Maximum sustainable government debt in the overlapping generations model. Manch Sch – CrossRef Google Scholar Schelnast M () Public debt: maximum sustainability and welfare effects of debt reduction in a two-country two-good diamond-type OLG : Anna Boisits, Matthias Schelnast.

Sustainable government debt in a two-good, two-country overlapping generations model Abstract. Dramatically rising government deficits in large open OECD countries make it imperative to explore limits for national government debt levels which if slightly exceeded would lead to a sudden collapse of the world economy. In a competitive two-sector overlapping generations model, I look at the effect of an increase in government debt on welfare, especially in the new steady state.3 Technologies in both the sectors are assumed to be Leontief.4 With Leontief technologies, the model is stable only if the consumption good is capital-intensive National Debt in a Neoclassical Growth Model. AEA Summary: Building on Paul Samuelson’s seminal work concerning consumption loans between individuals of different generations, this paper pioneered the analysis of overlapping generations (OLG) models with durable capital illumnated the properties of such models through two fundamental contributions. t and debt D t. The government intertemporal budget constraint is G t+R tD t t C t+˝ tw tL t+ tr tK t+D t+1 8t; (5) where R t denotes the return on government debt. Let ˇ= f t;˝ t; t;D tg1t =0 be a tax policy consisting of an in–nite sequence of proportional taxes and government debt, where D .

Fiscal Policy Rules in an Overlapping Generations Model with Endogenous Labour Supply Article in Journal of Economic Dynamics and Control 31(3) March with 16 ReadsAuthor: Giovanni Ganelli. Lecture 12 - Overlapping Generations Models of the Economy Overview. In order for Social Security to work, people have to believe there’s some possibility that the world will last forever, so that each old generation will have a young generation to support it. The sustainability of bond-financed deficits: An overlapping generations approach We consider in this section an overlapping generations model of government debt and physical capital as typified by Diamond () and Tirole The maximum sustainable deficit is given by the bifurcation point where only one steady state by: The overlapping generations (OLG) model is one of the dominating frameworks of analysis in the study of macroeconomic dynamics and economic contrast, to the Ramsey–Cass–Koopmans neoclassical growth model in which individuals are infinitely-lived, in the OLG model individuals live a finite length of time, long enough to overlap with at least one .