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

21 Pages Posted: 12 Apr 2004 Last revised: 13 Jan 2009

See all articles by Olivier J. Blanchard

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

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)

Multiple version iconThere are 2 versions of this paper

Date Written: February 1992

Abstract

Can governments roll their debt over forever in dynamically efficient economies, and thus avoid the need to raise taxes? While the answer is a clear no under certainty, it depends, under uncertainty, on whether public debt provides intergenerational insurance. When it does not, rollover is not possible, even if the rate of return on one-period bonds is below the growth rate. When it does, debt rollover may be possible, even if the return on one-period bonds is above the growth rate.

Suggested Citation

Blanchard, Olivier J. and Weil, Philippe, Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games Under Uncertainty (February 1992). NBER Working Paper No. w3992. Available at SSRN: https://ssrn.com/abstract=304860

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
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)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
43
Abstract Views
1,177
PlumX Metrics