A Party without a Hangover? On the Effects of U.S. Government Deficits / Douglas Laxton, Michael Kumhof.

Format:

Book

Government document

Author/Creator:

Laxton, Douglas.

Contributor:

Kumhof, Michael.

Series:

IMF Working Papers; Working Paper ; No. 2007/202

IMF Working Papers

Language:

English

Subjects (All):

Debts, Public--United States--Econometric models.

Debts, Public.

Fiscal policy--United States--Econometric models.

Fiscal policy.

Physical Description:

1 online resource (40 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2007.

Language Note:

English

Summary:

This paper develops a 2-country New Keynesian overlapping generations model suitable for the joint evaluation of monetary and fiscal policies. We show that a permanent increase in U.S. government deficits raises the world real interest rate and significantly increases U.S. current account deficits, especially in the medium- to long-run. A simultaneous increase in non-U.S. savings lowers the world real interest rate and further increases U.S. current account deficits. We show that conventional infinite horizon models are ill-equipped to deal with issues that involve permanent changes in public or private sector savings rates.

Contents:

Contents; I. Introduction; II. TheModel; A. Households; 1. Overlapping Generations Households; 2. Liquidity Constrained Households; 3. Aggregate Household Sector; B. Firms and Unions; 1. Manufacturers; 2. Unions; 3. Import Agents; 4. Distributors; 5. Retailers; C. Government; 1. Fiscal Policy; 2. Monetary Policy; D. Equilibriumand Balance of Payments; III. Calibration; IV. Implications of U.S. Government Deficits; A. Useful Steady-State Relationships; B. The Quantitative Predictions of the Two Models; V. Implications of Government Spending Cuts

VI. Implications of Private Sector Savings BehaviorVII. Conclusion; Figures; 1. Savings, Investment and Current Account Balances: U.S. and the Rest of the World; 2. Real Interest Rates and EMBI Spreads; 3. Sources of National Savings in the United States; 4. Flow Chart of theModel; 5. Permanent Increase in Government Debt in OLG and REP - Part I; 6. Permanent Increase in Government Debt in OLG and REP - Part II; 7. Cuts in Government Investment and Consumption; 8. Lower U.S. Rate of Time Preference and Higher RW Rate of Time Preference; References

Notes:

Description based upon print version of record.

Includes bibliographical references.

Description based on online resource; title from PDF cover (ebrary, viewed November 24, 2015).

ISBN:

9786613823373

9781462339679

1462339670

9781452739014

1452739013

9781283187640

1283187647

9781451912197

1451912196