Abstract

http://ssrn.com/abstract=290840
 
 

References (32)



 
 

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Dynamic Efficiency, the Riskless Rate and Debt Ponzi Games Under Uncertainty


Olivier J. Blanchard


International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Philippe Weil


Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

November 2001

MIT Department of Economics Working Paper No. 01-41

Abstract:     
In a dynamically efficienct economy, can a government roll its debt forever and avoid the need to raise taxes? In a series of examples of production economies with zero growth, this paper shows that such Ponzi games may be infeasible even when the average rate of return on bonds is negative, and may be feasible even when the average rate of return on bonds is positive. The paper then reveals the structure which underlies these examples.

Number of Pages in PDF File: 22

Keywords: Dynamic efficiency, pareto optimality, bubbles, Ponzi games, public debt, riskless rate.

JEL Classification: D51, D52, D60, E44, H60

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Date posted: November 17, 2001  

Suggested Citation

Blanchard, Olivier J. and Weil, Philippe, Dynamic Efficiency, the Riskless Rate and Debt Ponzi Games Under Uncertainty (November 2001). MIT Department of Economics Working Paper No. 01-41. Available at SSRN: http://ssrn.com/abstract=290840 or http://dx.doi.org/10.2139/ssrn.290840

Contact Information

Olivier J. Blanchard (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
202 623 7825 (Phone)
202 623 7271 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Philippe Weil
Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )
Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 4220 (Phone)
+32 2 650 4475 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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