Many issues in macroeconomics, such as the level of the steady state interest rate, or the dynamic effects of government deficit finance, depend crucially on the horizon of economic agents. This paper develops a simple analytical model in which such issues can be examined and in which the...

There is widespread feeling that current deficits, in Europe and the U.S.,may hurt rather than help the recovery. This paper examines some of the issues involved, through a sequence of three models.The first model focuses on sustainability and characterizes its determinants. It suggests that the...

This paper proposes a tractable framework to analyze fiscal space and the dynamics of government debt, with a possibly binding zero lower bound (ZLB) constraint. Without the ZLB, a greater primary deficit unambiguously raises debt. However, debt need not explode: When R G - φ, where φ is the...