Public debt in an OLG model with imperfect competition: long-run effects of austerity programs and changes in the growth rate

Authors

Peter Skott, University of Massachusetts - AmherstFollow
Soon Ryoo, Adelphi UniversityFollow

Working Paper Number

2013-10

Publication Date

2013

Abstract

We show that (i) dynamic inefficiency may be empirically relevant in a modified Diamond model with imperfect competition, (ii) if fiscal policy is used to avoid inefficiency and maintain an optimal capital intensity, the required debt ratio will be inversely related to the growth rate, and (iii) austerity policies reductions in government consumption and entitlement programs for the old generation raise the required debt ratio.

DOI

https://doi.org/10.7275/4759961

Recommended Citation

Skott, Peter and Ryoo, Soon, "Public debt in an OLG model with imperfect competition: long-run effects of austerity programs and changes in the growth rate" (2013). Economics Department Working Paper Series. 163.
https://doi.org/10.7275/4759961