We construct recursive solutions for, and study the properties of the dynamic equilibrium of an economy with three types of agents: (i) house-hold/investors who supply labor with a finite elasticity, consume a large variety of goods that are not perfect substitutes and trade government bonds;...

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...