Government Ponzi Games and Debt Dynamics Under Uncertainty
Government Ponzi Games and Debt Dynamics Under Uncertainty

Author: Mr.Carlo Cottarelli

Publisher: International Monetary Fund

Published: 1991-12-01

Total Pages: 26

ISBN-13: 1451854862

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We investigate the conditions for sustainability of debt roll-over schemes under uncertainty. In contrast with the requirements identified in recent research, we show that a necessary and sufficient condition for sustainability of such schemes is that the asymptotic interest rate on government debt be lower than the asymptotic growth rate of the economy, a natural extension of a familiar criterion in a deterministic framework. However, we also show that for realistic parameter values, Ponzi games that are sustainable in the long run may display explosive patterns over relatively long horizons. This may explain why governments may be reluctant to play Ponzi games even when they are feasible in the long run.

Government Ponzi Games and Debt Dynamics Under Uncertainty
Government Ponzi Games and Debt Dynamics Under Uncertainty

Author: Leonardo Bartolini

Publisher:

Published: 2006

Total Pages: 26

ISBN-13:

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We investigate the conditions for sustainability of debt roll-over schemes under uncertainty. In contrast with the requirements identified in recent research, we show that a necessary and sufficient condition for sustainability of such schemes is that the asymptotic interest rate on government debt be lower than the asymptotic growth rate of the economy, a natural extension of a familiar criterion in a deterministic framework. However, we also show that for realistic parameter values, Ponzi games that are sustainable in the long run may display explosive patterns over relatively long horizons. This may explain why governments may be reluctant to play Ponzi games even when they are feasible in the long run.

Dynamic Efficiency, the Rickless Rate and Debt
Dynamic Efficiency, the Rickless Rate and Debt

Author: Olivier J. Blanchard

Publisher:

Published: 2001

Total Pages: 21

ISBN-13:

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In a dynamically efficienct economy, can a government roll its debt forever and avoid the need to raise taxes? In a series of examples of production economies with zero growth, this paper shows that such Ponzi games may be infeasible even when the average rate of return on bonds is negative, and may be feasible even when the average rate of return on bonds is positive. The paper then reveals the structure which underlies these examples. Keywords: Dynamic efficiency, pareto optimality, bubbles, Ponzi games, public debt, riskless rate.

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

Author: Olivier J. Blanchard

Publisher:

Published: 2003

Total Pages: 0

ISBN-13:

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In a dynamically efficienct economy, can a government roll its debt forever and avoid the need to raise taxes? In a series of examples of production economies with zero growth, this paper shows that such Ponzi games may be infeasible even when the average rate of return on bonds is negative, and may be feasible even when the average rate of return on bonds is positive. The paper then reveals the structure which underlies these examples.

Government Ponzi Games and Debt Dynamics Under Uncertainty
Government Ponzi Games and Debt Dynamics Under Uncertainty

Author: Mr.Leonardo Bartolini

Publisher: International Monetary Fund

Published: 1991-12

Total Pages: 52

ISBN-13:

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We investigate the conditions for sustainability of debt roll-over schemes under uncertainty. In contrast with the requirements identified in recent research, we show that a necessary and sufficient condition for sustainability of such schemes is that the asymptotic interest rate on government debt be lower than the asymptotic growth rate of the economy, a natural extension of a familiar criterion in a deterministic framework. However, we also show that for realistic parameter values, Ponzi games that are sustainable in the long run may display explosive patterns over relatively long horizons. This may explain why governments may be reluctant to play Ponzi games even when they are feasible in the long run.

IMF Staff papers, Volume 39 No. 1
IMF Staff papers, Volume 39 No. 1

Author: International Monetary Fund. Research Dept.

Publisher: International Monetary Fund

Published: 1992-01-01

Total Pages: 220

ISBN-13: 1451956940

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This paper focuses on exchange rate economics. Two main views of exchange rate determination have evolved since the early 1970s: the monetary approach to the exchange rate (in flexible-price, sticky-price, and real interest differential formulations); and the portfolio balance approach. In this paper, the literature on these views is surveyed, followed by a discussion of the empirical evidence and likely future developments in the area of exchange rate determination. The literature on foreign exchange market efficiency, exchange rates and “news,” and international parity conditions is also reviewed.

Fiscal Sustainability in Theory and Practice
Fiscal Sustainability in Theory and Practice

Author: Craig Burnside

Publisher: World Bank Publications

Published: 2005

Total Pages: 312

ISBN-13: 9780821358740

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Topics discussed in this publication include: an introduction to theoretical and practical aspects of fiscal sustainability; theoretical prerequisites for fiscal sustainability analysis; debt indicators in the measurement of vulnerability; cyclical adjustment of budget surplus; pro-cyclical fiscal policy using Mexico's fiscal accounts as a case study; fiscal rules and the experience of Chile; currency crises and models for deal with financing costs.