Bossi, Luca; Gomis-Porqueras, Pere - In: Economics Bulletin 5 (2006) 17, pp. 1-4
In this paper, we study how deficit financing is affected by the introduction of habit formation in an otherwise standard Gale (JET, 1973) economy in which the government is a net lender and young agents are borrowing rather than saving. We find that the amount of deficit the government is able...