We study the impact of a government spending shock on the distribution of income and wealth between cohorts in a dynamic stochastic Overlapping Generations model with two types of households, Ricardian households and rule-of-thumb consumers. We demonstrate that an unexpected increase in...

We consider a dynamic general equilibrium model with collective wage bargaining and investigate how unemployment dynamics are affected by two types of budgetary policies. In line with traditional reasoning, a balanced-budget rule amplifies fluctuations in the short run, whereas an...

The debate over legal requirements of a balanced federal budget has gained new life. A requirement would have strong implications for future fiscal policy. Done right, a requirement will allow Congress to combine a balanced budget with policy goals such as growth and full employment. Done wrong,...

This paper investigates the interaction between labor market dynamics and sovereign debt risk. Countercyclical default risk and the limited ability to borrow during recessions renders the government a procyclical fiscal policy. The anticipation of higher tax rates in downturns discourages...

In a Diamond-type overlapping-generations setting public debt issuance places no burden on future generations including those who repay the debt if prices and wages are fixed and unemployment occurs in the periods in which public bonds are issued and repaid. Whether the collected fund is spent...

In a Diamond-type overlapping-generations setting public debt issuance places no burden on future generations including those who repay the debt if prices and wages are fixed and unemployment occurs in the periods in which public bonds are issued and repaid. Whether the collected fund is spent...

This paper develops an overlapping-generations model with nominal wage rigidities and examines the welfare effects of debt policy when unemployment exists. Issues of public debt stimulate aggregate consumption demand and create employment. Future generations then face both increased wage incomes...

We consider a dynamic general equilibrium model with collective wage bargaining and investigate how unemployment dynamics are affected by two types of budgetary policies. In line with traditional reasoning, a balanced-budget rule amplifies fluctuations in the short run, whereas an...

The paper examines the role of fiscal and monetary policy on the dynamics of monetary expansion in a macroeconomy. Its microeconomic structure defined by producers with neoclassical production functions, heterogeneous OLG consumers, and a stationary fiscal and monetary policy induces a...

This paper develops an overlapping-generations model with nominal wage rigidities and examines the welfare effects of debt policy when unemployment exists. Issues of public debt stimulate aggregate consumption demand and create employment. Future generations then face both increased wage incomes...