Fiscal Policy in a Tractable Liquidity-Constrained Economy
Xavier Ragot
(1, 2, 3)
,
Edouard Challe
(3, 4)
Xavier Ragot
- Fonction : Auteur
- PersonId : 11514
- IdHAL : xavier-ragot
- ORCID : 0000-0002-7874-8508
- IdRef : 06902104X
Edouard Challe
- Fonction : Auteur
- PersonId : 1099429
Résumé
We analyse the effects of fiscal expansions when public debt is used as liquidity by the private sector. Aggregate shocks are introduced into an incomplete-market economy where heterogenous agents face occasionally binding borrowing constraints and store wealth to smooth out idiosyncratic income fluctuations. Debt-financed increases in spending facilitate self-insurance by bond holders and may crowd in private consumption. They also loosen the borrowing constraints faced by firms, thereby raising labour demand and possibly the real wage. Whether private consumption and wages rise or fall ultimately depends on the relative strengths of the liquidity and wealth effects that arise following the shock.
Domaines
Economies et financesFormat du dépôt | Notice |
---|---|
Type de dépôt | Article dans une revue |
Titre |
en
Fiscal Policy in a Tractable Liquidity-Constrained Economy
|
Résumé |
en
We analyse the effects of fiscal expansions when public debt is used as liquidity by the private sector. Aggregate shocks are introduced into an incomplete-market economy where heterogenous agents face occasionally binding borrowing constraints and store wealth to smooth out idiosyncratic income fluctuations. Debt-financed increases in spending facilitate self-insurance by bond holders and may crowd in private consumption. They also loosen the borrowing constraints faced by firms, thereby raising labour demand and possibly the real wage. Whether private consumption and wages rise or fall ultimately depends on the relative strengths of the liquidity and wealth effects that arise following the shock.
|
Auteur(s) |
Xavier Ragot
1, 2, 3
, Edouard Challe
3, 4
1
PSE -
Paris School of Economics
( 301309 )
- 48 boulevard Jourdan 75014 Paris
- France
2
PSE -
Paris-Jourdan Sciences Economiques
( 139754 )
- 48 boulevard Jourdan 75014 Paris
- France
3
Centre de recherche de la Banque de France
( 171776 )
- 31 rue Croix des petits champs 75001 PARIS - France
- France
4
X -
École polytechnique
( 300340 )
- École polytechnique, 91128 Palaiseau Cedex
- France
|
Comité de lecture |
Oui
|
Vulgarisation |
Non
|
Langue du document |
Anglais
|
Nom de la revue |
|
Audience |
Non spécifiée
|
Date de publication |
2011-03
|
Volume |
121
|
Numéro |
551
|
Page/Identifiant |
273-317
|
Public visé |
Scientifique
|
Voir aussi |
|
Financement |
|
Domaine(s) |
|
Indexation contrôlée |
|
Mots-clés |
ro
Public debt, Fiscal expansions
|
DOI | 10.1111/j.1468-0297.2010.10.02399.x |
ProdINRA | 317391 |
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