Debt, Deficits and Finite Horizons : The Stochastic Case

Roger Farmer, Carine Nourry, Alain Venditti

We introduce a solution technique for the study of discrete time stochastic models populated by long-lived agents. We introduce aggregate uncertainty and complete markets into a 'perpetual-youth' model of a kind first studied by Olivier Blanchard and we show that the pure-trade version of the model behaves much like the two-period overlapping generations model. Our methods are easily generalized to economies with production and they should prove useful to researchers who seek a tractable stochastic model in which fiscal policy has real effects on aggregate allocations

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Year of publication:	June 2009
Authors:	Farmer, Roger
Other Persons:	Venditti, Alain (contributor) ; Nourry, Carine (contributor)
Institutions:	National Bureau of Economic Research (contributor)
Publisher:	Cambridge, Mass : National Bureau of Economic Research
Subject:	Öffentliche Schulden \| Public debt \| Finanzpolitik \| Fiscal policy \| Overlapping Generations \| Overlapping generations \| Konjunktur \| Business cycle \| Makroökonomik \| Macroeconomics \| Bruttoinlandsprodukt \| Gross domestic product

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