Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games Under Uncertainty PDF Download
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Author: Olivier J. Blanchard
Publisher:
ISBN:
Category : Debts, Public
Languages : en
Pages : 19
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Book Description
Can governments roll their debt over forever in dynamically efficient economies, and thus avoid the need to raise taxes? While the answer is a clear no under certainty, it depends, under uncertainty, on whether public debt provides intergenerational insurance. When it does not, rollover is not possible, even if the rate of return on one-period bonds is below the growth rate. When it does, debt rollover may be possible, even if the return on one-period bonds is above the growth rate.
Author: Olivier J. Blanchard
Publisher:
ISBN:
Category : Debts, Public
Languages : en
Pages : 19
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Book Description
Can governments roll their debt over forever in dynamically efficient economies, and thus avoid the need to raise taxes? While the answer is a clear no under certainty, it depends, under uncertainty, on whether public debt provides intergenerational insurance. When it does not, rollover is not possible, even if the rate of return on one-period bonds is below the growth rate. When it does, debt rollover may be possible, even if the return on one-period bonds is above the growth rate.
Author: Olivier J. Blanchard
Publisher:
ISBN:
Category :
Languages : en
Pages : 21
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Book Description
Can governments roll their debt over forever in dynamically efficient economies, and thus avoid the need to raise taxes? While the answer is a clear no under certainty, it depends, under uncertainty, on whether public debt provides intergenerational insurance. When it does not, rollover is not possible, even if the rate of return on one-period bonds is below the growth rate. When it does, debt rollover may be possible, even if the return on one-period bonds is above the growth rate.
Author: Olivier J. Blanchard
Publisher:
ISBN:
Category :
Languages : en
Pages : 21
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Book Description
In a dynamically efficienct economy, can a government roll its debt forever and avoid the need to raise taxes? In a series of examples of production economies with zero growth, this paper shows that such Ponzi games may be infeasible even when the average rate of return on bonds is negative, and may be feasible even when the average rate of return on bonds is positive. The paper then reveals the structure which underlies these examples. Keywords: Dynamic efficiency, pareto optimality, bubbles, Ponzi games, public debt, riskless rate.
Author: Mr.Carlo Cottarelli
Publisher: International Monetary Fund
ISBN: 1451854862
Category : Business & Economics
Languages : en
Pages : 26
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Book Description
We investigate the conditions for sustainability of debt roll-over schemes under uncertainty. In contrast with the requirements identified in recent research, we show that a necessary and sufficient condition for sustainability of such schemes is that the asymptotic interest rate on government debt be lower than the asymptotic growth rate of the economy, a natural extension of a familiar criterion in a deterministic framework. However, we also show that for realistic parameter values, Ponzi games that are sustainable in the long run may display explosive patterns over relatively long horizons. This may explain why governments may be reluctant to play Ponzi games even when they are feasible in the long run.
Author: Philippe Weil
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Author: Olivier Blanchard
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Author: L. Bartolini
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Gerald J. Miller
Publisher: Routledge
ISBN: 1351564633
Category : Political Science
Languages : en
Pages : 992
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Book Description
Examining various methods of debt management used in the US., Handbook of Debt Management, provides a comprehensive analysis of securities offered for sale by municipalities, states, and the federal government. The book covers laws regarding municipal bonds, the economic choice between debt and taxes and the tax-exempt status of municipal bond owners, capital budgeting, including state and local government practices, developing governmental and intergovernmental debt policies, pay-as-you-go with debt financing for capital projects, US Internal Revenue Service regulations on arbitrage in state and local government debt proceeds investment, US treasury auctions, and more.
Author: Marcelo Bianconi
Publisher: World Scientific
ISBN: 9814355135
Category : Business & Economics
Languages : en
Pages : 496
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Book Description
Financial Economics, Risk and Information presents the fundamentals of finance in static and dynamic frameworks with focus on risk and information. The objective of this book is to introduce undergraduate and first-year graduate students to the methods and solutions of the main problems in finance theory relating to the economics of uncertainty and information. The main goal of the second edition is to make the materials more accessible to a wider audience of students and finance professionals. The focus is on developing a core body of theory that will provide the student with a solid intellectual foundation for more advanced topics and methods. The new edition has streamlined chapters and topics, with new sections on portfolio choice under alternative information structures. The starting point is the traditional mean-variance approach, followed by portfolio choice from first principles. The topics are extended to alternative market structures, alternative contractual arrangements and agency, dynamic stochastic general equilibrium in discrete and continuous time, attitudes towards risk and towards inter-temporal substitution in discrete and continuous time; and option pricing. In general, the book presents a balanced introduction to the use of stochastic methods in discrete and continuous time in the field of financial economics.
Author: Philip Barrett
Publisher: International Monetary Fund
ISBN: 1484350987
Category : Business & Economics
Languages : en
Pages : 55
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Book Description
Do persistently low nominal interest rates mean that governments can safely borrow more? To addresses this question, I extend the model of Ghosh et al. [2013] to allow for persistent stochastic changes in nominal interest and growth rates. The key model parameter is the long-run difference between nominal interest and growth rates; if negative, maximum sustainable debts (debt limits) are unbounded. I show how both VAR- and spectral-based methods produce negative point estimates of this long-run differential, but cannot reject positive values at standard significance levels. I calibrate the model to the UK using positive but statistically plausible average interest-growth differentials. This produces debt limits which increase by only around 5% GDP as interest rates fall after 2008. In contrast, only a tiny change in the long-run average interest-growth differential – from the 95th to the 97.5th percentile of the distribution – is required to move average debt limits by the same amount.
