Government Debt, Life-Cycle Income and Liquidity Constrains : Beyond Approximate Ricardian Equivalence /

Evans (1991) has demonstrated that Blanchard's (1985) finite-horizon model obeys approximate Ricardian equivalence. We show that this result is determined largely by an unrealistic assumption that labor income grows monotonically over a consumer's entire lifetime. Introducing more realisti...

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Bibliografische gegevens
Hoofdauteur: Symansky, Steven
Andere auteurs: Faruqee, Hamid, Laxton, Douglas
Formaat: Tijdschrift
Taal:English
Gepubliceerd in: Washington, D.C. : International Monetary Fund, 1996.
Reeks:IMF Working Papers; Working Paper ; No. 1996/140
Online toegang:Full text available on IMF
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245 1 0 |a Government Debt, Life-Cycle Income and Liquidity Constrains :   |b Beyond Approximate Ricardian Equivalence /  |c Steven Symansky, Douglas Laxton, Hamid Faruqee. 
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300 |a 1 online resource (30 pages) 
490 1 |a IMF Working Papers 
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500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
506 |a Electronic access restricted to authorized BRAC University faculty, staff and students 
520 3 |a Evans (1991) has demonstrated that Blanchard's (1985) finite-horizon model obeys approximate Ricardian equivalence. We show that this result is determined largely by an unrealistic assumption that labor income grows monotonically over a consumer's entire lifetime. Introducing more realistic lifetime earnings profiles, we find that the effects of government debt on the real interest rate and the capital stock become considerably larger. In particular, leaving aside the effects of distortionary capital taxation, the extended model with liquidity constraints predicts that real interest rates would decline by about 150-200 basis points if government debt were eliminated completely in all OECD countries. 
538 |a Mode of access: Internet 
700 1 |a Faruqee, Hamid. 
700 1 |a Laxton, Douglas. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 1996/140 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/1996/140/001.1996.issue-140-en.xml  |z IMF e-Library