Standard theory prescribes that the government hedge against shocks to its expenditures by generating total debt portfolio returns with a negative beta on government expenditure innovations. This paper asseses how well the government manages its debt portfolio against the benchmark government...

Social insurance arrangements that are optimal from the perspective of a utilitarian planner confronting a population of privately informed agents frequently exhibit an "immiseration" property - with probability 1 an agent's continuation utility will drift downwards to its minimal level. Thus,...

We study dynamic optimal taxation in a class of economies with private information over idiosyncratic skill shocks. We consider economies in which the skill distribution is first order Markov. We show that there exists a tax system that implements the constrained optimal allocation as...

We explore the implications of recursive utility for the conduct of fiscal policy.

In a model with housing collateral, the ratio of housing wealth to human wealth shifts the conditional distribution of consumption growth. In the model, a decrease in house prices reduces the collateral value of housing, increases household exposure to idiosyncratic risk, reduces the amount of...