Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152780
Authors: 
Ascari, Guido
Rankin, Neil
Year of Publication: 
2004
Series/Report no.: 
ECB Working Paper 346
Abstract: 
In the “perpetual youth” overlapping-generations model of Blanchard and Yaari, if leisure is a “normal” good then some agents will have negative labour supply. We suggest a solution to this problem by using a modified version of Greenwood, Hercowitz and Huffman’s utility function. The modification incorporates real money balances, so that the model may be used to analyse monetary as well as fiscal policy. In a Walrasian version of the economy, we show that increased government debt and increased government spending raise the interest rate and lower output, while an open-market operation to increase the money supply lowers the interest rate and raises output.
Subjects: 
Blanchard-Yaari overlapping generations
endogenous labour supply
JEL: 
D91
E63
Document Type: 
Working Paper

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