Dumas, Bernard; Ehling, Paul; Yang, Chunyu - National Bureau of Economic Research - 2021
In a deterministic overlapping-generations economy with production and physical capital, the price of debt can be … positive without any budget surpluses being in the offing, because debt incorporates a rational bubble. Yet the dynamics of … debt remain a function of the dynamics of the primary budget deficit. As a way to study their joint behavior, we endogenize …