Arbeitspapier
Deep habits and the macroeconomic effects of government debt
In this paper, we study the effects of government debt on macroeconomic aggregates in a non-Ricardian framework. We develop a micro-founded framework which combines time-varying markups, endogenous labor supply and overlapping generations based on infinitely-lived families. The main contribution of this paper is to provide a new transmission mechanism of public debt through the countercyclical markup movements induced by external deep habits. We analyze the effects of debt-financed tax cuts. We show that the interest rate rises, entailing higher markups, which imply a fall in employment and consumption. It is particularily noteworthy that, even without capital, a crowding out effect of government debt is obtained in the long run. However, the short-run expansionary effect of debt-financed tax cuts, which would eventually be expected in a non-Ricardian framework, fails to occur. This is due to our flexible-price framework. On the other hand, we show that incorporating sticky prices in our model causes debt-financed tax cuts to have a short-run expansionary effect while preserving the long-run contractionary effect.
- ISBN
-
978-3-86558-655-1
- Sprache
-
Englisch
- Erschienen in
-
Series: Discussion Paper Series 1 ; No. 2010,22
- Klassifikation
-
Wirtschaft
Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
Monetary Policy
- Thema
-
Wealth Effects
Fiscal Policy
Public Debt Shock
Deep Habits
Overlapping Generations
Monopolistic Competition
Öffentliche Schulden
Makroökonomischer Einfluss
Crowding out
Steuerpolitik
Vermögenseffekt
Overlapping Generations
Monopolistischer Wettbewerb
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Aloui, Rym
- Ereignis
-
Veröffentlichung
- (wer)
-
Deutsche Bundesbank
- (wo)
-
Frankfurt a. M.
- (wann)
-
2010
- Handle
- Letzte Aktualisierung
-
01.12.20252024, 13:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Aloui, Rym
- Deutsche Bundesbank
Entstanden
- 2010
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