TY - JOUR
T1 - Managing government debt
AU - Jiang, Wei
AU - Sargent, Thomas J.
AU - Wang, Neng
AU - Yang, Jinqiang
N1 - Publisher Copyright:
© 2024 National Academy of Sciences. All rights reserved.
PY - 2024/3/12
Y1 - 2024/3/12
N2 - To construct a stochastic version of [R. J. Barro, J. Polit. Econ. 87, 940–971 (1979)] normative model of tax rates and debt/GDP dynamics, we add risks and markets for trading them along lines suggested by [K. J. Arrow, Rev. Econ. Stud. 31, 91–96 (1964)] and [R. J. Shiller, Creating Institutions for Managing Society’s Largest Economic Risks (OUP, Oxford, 1994)]. These modifications preserve Barro’s prescriptions that a government should keep its debt-gross domestic product (GDP) ratio and tax rate constant over time and also prescribe that the government insure its primary surplus risk by selling or buying the same number of shares of a Shiller macro security each period.
AB - To construct a stochastic version of [R. J. Barro, J. Polit. Econ. 87, 940–971 (1979)] normative model of tax rates and debt/GDP dynamics, we add risks and markets for trading them along lines suggested by [K. J. Arrow, Rev. Econ. Stud. 31, 91–96 (1964)] and [R. J. Shiller, Creating Institutions for Managing Society’s Largest Economic Risks (OUP, Oxford, 1994)]. These modifications preserve Barro’s prescriptions that a government should keep its debt-gross domestic product (GDP) ratio and tax rate constant over time and also prescribe that the government insure its primary surplus risk by selling or buying the same number of shares of a Shiller macro security each period.
KW - Ricardian equivalence
KW - risk premium
KW - tax smoothing
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U2 - 10.1073/pnas.2318365121
DO - 10.1073/pnas.2318365121
M3 - Article
C2 - 38451950
AN - SCOPUS:85187163130
SN - 0027-8424
VL - 121
JO - Proceedings of the National Academy of Sciences of the United States of America
JF - Proceedings of the National Academy of Sciences of the United States of America
IS - 11
M1 - e2318365121
ER -