Data and Code for: Public Debt, Interest Rates, and Negative Shocks
Principal Investigator(s): View help for Principal Investigator(s) Richard W. Evans, University of Chicago, Computational Social Sciences
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
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| code | 01/21/2020 05:12:AM | ||
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application/pdf | 203.1 KB | 01/23/2020 08:26:PM |
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application/pdf | 154.4 KB | 01/21/2020 12:16:AM |
Project Citation:
Evans, Richard W. Data and Code for: Public Debt, Interest Rates, and Negative Shocks. Nashville, TN: American Economic Association [publisher], 2020. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-09-21. https://doi.org/10.3886/E117321V1
Project Description
Summary:
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This repository contains code and documentation for the analyses in "Public Debt, Interest Rates, and Negative Shocks," by Richard W. Evans.
Abstract:
Debt-to-GDP ratios across developed economies are at historically high levels and government borrowing rates have remained persistently low. Blanchard (2019) provides evidence that the fiscal costs are low of increased government debt in low interest rate environments and that long-run average welfare effects can be positive. This paper attempts to replicate Blanchard's main results and tests their robustness to some key assumptions about risk in the model. This study finds that the attempted replication of Blanchard's stated approach results in no long-run average welfare gains from increased government debt and that those welfare losses are exacerbated if some strong risk-reducing assumptions are relaxed to more realistic values. Furthermore, I argue that the Blanchard calibration strategy also biases the results toward more beneficial government debt.
Abstract:
Debt-to-GDP ratios across developed economies are at historically high levels and government borrowing rates have remained persistently low. Blanchard (2019) provides evidence that the fiscal costs are low of increased government debt in low interest rate environments and that long-run average welfare effects can be positive. This paper attempts to replicate Blanchard's main results and tests their robustness to some key assumptions about risk in the model. This study finds that the attempted replication of Blanchard's stated approach results in no long-run average welfare gains from increased government debt and that those welfare losses are exacerbated if some strong risk-reducing assumptions are relaxed to more realistic values. Furthermore, I argue that the Blanchard calibration strategy also biases the results toward more beneficial government debt.
Scope of Project
Subject Terms:
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Public debt;
Overlapping generations;
Fiscal Policy;
Interest Rates
JEL Classification:
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C63 Computational Techniques; Simulation Modeling
D15 Intertemporal Household Choice; Life Cycle Models and Saving
E43 Interest Rates: Determination, Term Structure, and Effects
E62 Fiscal Policy
G12 Asset Pricing; Trading Volume; Bond Interest Rates
H63 National Debt; Debt Management; Sovereign Debt
C63 Computational Techniques; Simulation Modeling
D15 Intertemporal Household Choice; Life Cycle Models and Saving
E43 Interest Rates: Determination, Term Structure, and Effects
E62 Fiscal Policy
G12 Asset Pricing; Trading Volume; Bond Interest Rates
H63 National Debt; Debt Management; Sovereign Debt
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