Debt, Deficits and Finite Horizons: The Stochastic Case

Roger Farmer, Carine Nourry and Alain Venditti

No 15025, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We introduce a solution technique for the study of discrete time stochastic models populated by long-lived agents. We introduce aggregate uncertainty and complete markets into a 'perpetual-youth' model of a kind first studied by Olivier Blanchard and we show that the pure-trade version of the model behaves much like the two-period overlapping generations model. Our methods are easily generalized to economies with production and they should prove useful to researchers who seek a tractable stochastic model in which fiscal policy has real effects on aggregate allocations.

JEL-codes: C10 E0 E6 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-cba and nep-dge
Note: EFG
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Citations: View citations in EconPapers (2)

Published as Farmer, Roger E.A. & Nourry, Carine & Venditti, Alain, 2011. "Debt, deficits and finite horizons: The stochastic case," Economics Letters, Elsevier, vol. 111(1), pages 47-49, April.

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Related works:
Journal Article: Debt, deficits and finite horizons: The stochastic case (2011)
Working Paper: Debt, deficits and finite horizons: the stochastic case (2009)
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