Public Debt and Functional Finance in an OLG Model with Imperfect Competition

Arbeitspapier

This paper examines the role of fiscal policy in the long run. We show that (i) dynamic inefficiency may be empirically relevant in a modified Diamond OLG model with imperfect competition, (ii) fiscal policy may be needed to avoid inefficiency (if investment adjusts passively to saving) and maintain full employment (if investment and saving decisions are taken separately), (iii) a simple and distributionally neutral tax scheme can maintain full employment in the face of variations in 'household confidence', and (iv) the debt ratio is inversely related to both the growth rate and government consumption. JEL Categories: E62, E22

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2012-10

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Investment; Capital; Intangible Capital; Capacity
• Subject: Public debt ; Keynesian OLG model ; dynamic efficiency ; confidence ; sustainability

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Skott, Peter ; Ryoo, Soon
• Event: Veröffentlichung
• (who): University of Massachusetts, Department of Economics
• (where): Amherst, MA
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/105762
• Last update: 10.03.2025, 11:43 AM CET