Using data on U.S. and Japanese government debt, we calibrate a version of Weil's (1989) model and study the international and intergenerational consequences of recent fiscal policy. Assuming debt/GDP ratios stabilize at current levels, the model implies: (1) the world real interest rate rises...

We study the properties of an overlapping generations model with many-period-lived agents, neoclassical production and capital accumulation, labor-leisure decisions, population growth, and technological progress. We demonstrate that a plausibly calibrated version of this model has "monetary...

The government increased payments to individuals without reducing spending elsewhere in the budget.

Each year, the Congressional Budget Office (CBO) publishes its Budget and Economic Outlook. The CBO’s deficit projections for the current fiscal year (FY) and the next 10 FYs are widely followed because they provide an assessment of the medium-term budget outlook based on current law and a...

Essay from the 2011 Annual Report.

In this paper, the authors advance the theory and computation of Eaton-Gersovitz style models of sovereign debt by incorporating long-term debt and proving the existence of an equilibrium price function with the property that the interest rate on debt is increasing in the amount borrowed and...