Economics Department Working Paper Series
Working Paper Number
2012-10
Publication Date
2012
Abstract
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.
DOI
https://doi.org/10.7275/3697097
Recommended Citation
Skott, Peter and Ryoo, Soon, "Public Debt and Functional Finance in an OLG Model with Imperfect Competition" (2012). Economics Department Working Paper Series. 151.
https://doi.org/10.7275/3697097