Dynamic efficiency, the rickless rate and debt
Subtitle: Ponzi games under uncertainty
By: Olivier Blanchard [and] Philippe Weil
Contributors: Weil, Philippe; Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper -- 01-41; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 01-41.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2001
Place of publication: Cambridge, MA
Language: eng
Number of pages: 21
Other titles: Ponzi games under uncertainty
Description: In a dynamically efficienct economy, can a government roll its debt forever and avoid the need to raise taxes? In a series of examples of production economies with zero growth, this paper shows that such Ponzi games may be infeasible even when the average rate of return on bonds is negative, and may be feasible even when the average rate of return on bonds is positive. The paper then reveals the structure which underlies these examples. Keywords: Dynamic efficiency, pareto optimality, bubbles, Ponzi games, public debt, riskless rate.
Notes: Title from cover.

"November 2001."

Includes bibliographical references (p. 19-21).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.

Supported in part by the National Science Foundation.