In this paper we develop a small open economy, overlapping generations (OLG) model that incorporates non-stationary demographic transition paths to study the dynamic fiscal effects of demographic shift in Australia. Our main results are summarised as follows. First, the demographic shifts...

We study the effects of tax shocks on the budget and external deficits for 16 industrialized countries over the post-1975 period. Our structural approach is based on a tractable small open-economy model where a tax cut innovation generates a budget deficit. In turn, the budget deficit affects...

This paper develops an overlapping-generations model with heterogeneous agents in terms of earning ability and cash-in-advance constraint. It shows that tax policy cannot fully replicate or neutralize the redistributive implications of monetary policy. While who gets the extra money becomes...

Everywhere in the industrialized world, population aging is putting social security systems under financial strain. As a result, social security systems are being reformed in many countries. In particular, various countries move from pure pay-as-you-go (PAYG) systems to pension systems that...

This paper examines the distributional and efficiency impacts of public debt consolidation financed through a carbon tax employing a dynamic general-equilibrium model with overlapping generations of the U.S. economy. The numerical model features government taxes and spending and a multi-sectoral...

Many developing countries are characterised by a large share of home production. Households allocate their time on both market and non-market activities. The introduction of a tax on labour or capital income induces people to divert from market production to home production. Furthermore,...

Does the level of government debt affect living standards and if so, to what extent? We quantify the impact of the U.S. federal debt using an open economy overlapping generations model in which consumers have long but finite lifetimes. A demographic structure allows fiscal policy changes to have...

We explore the implications of adopting a Taylor-type interest-rate rule in a simple monetary growth model in which budget deficits are financed partly by unbacked government debt. To ensure uniqueness of the steady-state equilibrium, monetary policy cannot be either too "active" or too...

The paper studies the short-run, transitional, and long-run output effects of permanent and temporary shocks in public consumption under various financing methods. To this end, a dynamic macroeconomic model for a closed economy is developed, which features a perfectly competitive final goods...

We study the effects of aging population on the sustainability of fiscal policy in overlapping generations models with government debt and a pay-as-you-go pension system. The smaller the population growth rate, the lower the maximum sustainable level of deficits. When the utility function is of...