Governments are facing increasing scrutiny over debt and deficits following the worldwide recession and financial crisis which began in 2007. Additionally, policy makers are confronted with the growing realization that they face fiscal limits on the size of debt and deficits relative to GDP....

Every country has a fiscal limit on debt, where that limit represents a debt level so high that the country's economic and political systems cannot raise taxes or reduce spending sufficiently to maintain solvency. At the limit, creditors flee, and the government faces a fiscal crisis. If we knew...

This paper studies the interaction between time preference heterogeneity and precautionary saving in generating both persistent current account imbalance and a stationary equilibrium distribution of wealth across countries. We use numerical techniques to present two sets of results. First, when...