Abstract
Public debt is considered in a multi‐country version of the Diamond OLG model with a focus on its maximal sustainable value. Imperfect asset substitutability gives rise to a further nonlinearity through a risk premium, and, if primary deficits are exogenous, it is an additional source of bifurcation maximum. The merits of this portfolio approach are (i) an analysis that can embrace the broad empirical pattern of relative rates of return, and (ii) the result that a large amount of public debt may reflect a persistently low demand for it, so that potential crises may emanate from the demand side of its market.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
