Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games under Uncertainty

In a dynamically efficient economy, can a government roll its debt forever and avoid the need to raise taxes? In a series of examples of economies with zero growth, this paper shows that such Ponzi games may be infeasible even when the average rate of return on bonds is negative, and may be feasible even when the average rate of return on bonds is positive. The paper then reveals the structure which underlies these examples.

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Year of publication:	2001
Authors:	Blanchard, Olivier ; Weil, Philippe
Published in:	Advances in Macroeconomics. - Berkeley Electronic Press. - Vol. 1.2001, advances/1/2, p. 1031-1031
Publisher:	Berkeley Electronic Press
Subject:	dynamic efficiency \| riskless rate \| ponzi games

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Extent:	application/pdf
Type of publication:	Article
Notes:	oai:bepress:bejm-1031
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005046370