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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.
Year of publication:
2001-11-27
Authors: Weil, Philippe ; Blanchard, Olivier J.
Institutions: Sciences Po
Extent:
application/pdf
Series:
Type of publication: Book / Working Paper
Language: English
Notes:
Published in Advances in Macroeconomics (2001-11-27) v.1, p.1-21
Source:
Persistent link: https://www.econbiz.de/10008575193
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