Debt and deficit fluctuations in a time-consistent setup

Article

Grechyna, D. 2016. Debt and deficit fluctuations in a time-consistent setup. Macroeconomic Dynamics. 20 (7), pp. 1771-1794. https://doi.org/10.1017/S1365100515000073
TypeArticle
TitleDebt and deficit fluctuations in a time-consistent setup
AuthorsGrechyna, D.
Abstract

This paper compares the stochastic behavior of fiscal variables under optimal fiscal policy for the cases of full commitment by the government (Ramsey problem) and no commitment by the government (focusing on differentiable Markov perfect equilibrium). It shows that the cyclical properties of fiscal variables are similar for both commitment assumptions.
These conclusions are robust to two different specifications of the structure of public bonds (risk-free and state-contingent), and to different sets of the parameters. The cyclical properties of fiscal variables, regardless of commitment assumptions, can be determined by the parameters of the utility function.

PublisherCambridge University Press (CUP)
JournalMacroeconomic Dynamics
ISSN1365-1005
Publication dates
Online25 Sep 2015
Print01 Oct 2016
Publication process dates
Deposited07 Apr 2015
Submitted2015
Output statusPublished
Accepted author manuscript
Copyright Statement

This article has been published in a revised form in Macroeconomic Dynamics, http://doi.org/10.1017/S1365100515000073. This version is free to view and download for private research and study only. Not for re-distribution, re-sale or use in derivative works. © Cambridge University Press 2015

Digital Object Identifier (DOI)https://doi.org/10.1017/S1365100515000073
LanguageEnglish
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