A p Theory of Taxes and Debt Management

Wei Jiang, Thomas Sargent, Neng Wang and Jinqiang Yang

No 29931, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Distortions induce a benevolent government that must finance an exogenous expenditure process to smooth taxes. An optimal fiscal plan determines the marginal cost —p’ of servicing government debt and makes government debt risk-free. A convenience yield tilts debts forward and taxes backward. An option to default determines debt capacity. Debt-GDP ratio dynamics are driven by 1) a primary deficit, 2) interest payments, 3) GDP growth, and 4) hedging costs. We provide quantitative comparative dynamic statements about debt capacity, debt-GDP ratio transition dynamics, and time to exhaust debt capacity.

JEL-codes: E44 E62 G12 H21 H63 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-fdg, nep-mac, nep-pbe and nep-pub
Note: AP EFG IFM ME PE
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w29931.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:29931

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w29931

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().