Debt and government spending in ambiguous times

Anastasios Karantounias and Axelle Ferriere

No 1129, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: First, we endogenize government expenditures and study their optimal provision and mix with distortionary taxes in an economy without ambiguity. Second, we show that uncertainty over the distribution of shocks generates procyclical or countercyclical allocation of distortions, whereas without ambiguity distortions would be acyclical. Third, we provide a quantitative evaluation of the fiscal plan with ambiguity and analyze its short- and long-run properties. Preliminary results suggest that optimal policy would, (1) delay distortions for the future, or, (2) accelerate distortions and converge to a balanced budget in the long-run, depending on the size of the intertemporal elasticity of substitution.

Date: 2014
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2014/paper_1129.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:red:sed014:1129

Access Statistics for this paper

More papers in 2014 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().