Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/95331
Authors: 
Ascari, Guido
Rankin, Neil
Year of Publication: 
2010
Series/Report no.: 
Quaderni di Dipartimento 133
Abstract: 
We construct a staggered-price dynamic general equilibrium model with overlapping generations based on uncertain lifetimes. Price stickiness plus lack of Ricardian Equivalence could be expected to make an increase in government debt, with associated changes in lumpsum taxation, effective in raising short-run output. However we find this is very sensitive to the monetary policy rule. A permanent increase in debt under a basic Taylor Rule does not raise output. To make debt effective we need either a temporary nominal interest rate peg; or inertia in the rule; or an exogenous money supply policy; or to make the debt increase temporary.
Subjects: 
staggered prices
overlapping generations
government debt
fiscal policy effectiveness
monetary policy rules
JEL: 
E62
E63
Document Type: 
Working Paper

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