Desbonnet, Audrey; Kankanamge, Sumudu - HAL - 2008
This paper assesses the long-run optimal level of public debt in a framework where aggregate fluctuations are taken … perfectly insuring against risk. We find that the long-run optimal level of public debt is generally higher in a setting … precautionary saving. Higher levels of public debt, by effectively reducing the cost of precautionary saving, help agents to smooth …