Kankanamge, Sumudu; Desbonnet, Audrey - Université Paris-Dauphine (Paris IX) - 2008
This paper considers the impact of macroeconomic fluctuations on the optimal level of public debt. Households are subject to both aggregate and idiosyncratic risk and insurance market imperfectness prevents them from from fully insuring against risk. We find that the optimal level of public debt...