Seminar in Applied Economics: Ricardo Reis
NOV 02, 2021 | 12:00 PM TO 1:45 PM
November 02, 2021: 12:00 PM-1:45 PM
Fall 2021 Seminar in Applied Economics will feature Ricardo Reis.
Professor Reis will be presenting on "The constraint on public debt when r<g but g<m” on November 2nd at 12pm via zoom.
Please feel free to register and attend the event using the zoom link below:
Please note that this seminar will not be recorded.
With real interest rates below the growth rate of the economy, but the marginal product of capital above it, the public debt can be lower than the present value of primary surpluses because of a bubble premia on the debt. The government can run a deficit forever. In a model that endogenizes the bubble premium as arising from the safety and liquidity of public debt, more government spending requires a larger bubble premium, but because people want to hold less debt, there is an upper limit on spending. Inflation reduces the fiscal space, financial repression increases it, and redistribution of wealth or income taxation have an unconventional effect on fiscal capacity through the bubble premium.