Fiscal Limits in Advanced Economies

Eric Leeper and Todd Walker

No 16819, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved fiscal stress raises the possibility that the economies will hit their fiscal limits where taxes and spending no longer adjust to stabilize debt. In such economies, monetary policy may lose its ability to control inflation and influence the economy in the usual ways. The paper discusses models of fiscal limits and their implications and lays out a research agenda to integrate political economy and empirical considerations with general equilibrium models of monetary and fiscal interactions.

JEL-codes: E30 E62 E63 H60 (search for similar items in EconPapers)
Date: 2011-02
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

Published as Eric M. Leeper & Todd B. Walker, 2011. "Fiscal Limits in Advanced Economies*," Economic Papers: A journal of applied economics and policy, vol 30(1), pages 33-47.

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Journal Article: Fiscal Limits in Advanced Economies (2011)
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