Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87120
Authors: 
Ascari, Guido
Rankin, Neil
Year of Publication: 
2003
Series/Report no.: 
Quaderni di Dipartimento, EPMQ, Università degli Studi di Pavia 159
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.
Document Type: 
Working Paper

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