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Article Dans Une Revue Macroeconomic Dynamics Année : 2013

DEEP HABITS AND THE MACROECONOMIC EFFECTS OF GOVERNMENT DEBT

Résumé

In this paper, we study the effects of government debt on macroeconomic aggregates in a non-Ricardian framework. We develop a microfounded framework that combines time-varying markups, endogenous labor supply, and overlapping generations based on infinitely lived families. The main contribution of this paper is to provide a new transmission mechanism for public debt through the countercyclical markup movements induced by external deep habits. We analyze the effects of a positive shock to public debt. We show that the interest rate rises, entailing higher markups and a fall in employment and consumption. Interestingly, even without capital, a crowding-out effect of government debt is obtained in the long run. In addition, we show that when prices are sticky, public debt has a short-run expansionary effect, which is strengthened by the presence of deep habits.

Dates et versions

hal-03230857 , version 1 (20-05-2021)

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Citer

Rym Aloui. DEEP HABITS AND THE MACROECONOMIC EFFECTS OF GOVERNMENT DEBT. Macroeconomic Dynamics, 2013, 17 (8), pp.1659-1686. ⟨10.1017/S1365100512000259⟩. ⟨hal-03230857⟩
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