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Optimal Long-Run Fiscal Policy: Constraints, Preferences and the Resolution of Uncertainty / Alan J. Auerbach, Kevin A. Hassett.
- Format:
- Book
- Author/Creator:
- Auerbach, Alan J.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w9132.
- NBER working paper series no. w9132
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Optimal Long-Run Fiscal Policy
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2002.
- Summary:
- We construct a computational dynamic stochastic overlapping generations general equilibrium model with uncertain lifetimes and explore the impact of policy stickiness (specifically, a major reform will preclude future reforms for a generation) on optimal long-run fiscal policy. Under such circumstances, entitlement reforms exhaust a valuable option to move in the future. We explore the conditions under which the gain to waiting is large enough to induce optimizing policymakers to delay reforming a suboptimal system. We also allow for the uncertainty to have ARCH characteristics and explore the impact of time-varying uncertainty on the optimality of delayed policy action.
- Notes:
- Print version record
- August 2002.
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