Functional finance and intergenerational distribution in a Keynesian OLG model

No 2015-13, UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: This paper examines the role of fiscal policy in the long run. We show that (i) dynamic inefficiency in a standard OLG model generates aggregate demand problems in a Keynesian setting, (ii) fiscal policy can be used to achieve full-employment growth, (iii) the required debt ratio is inversely related to both the growth rate and government consumption, and (iv) a simple and distributionally neutral tax scheme can maintain full employment in the face of variations in ‘household confidence’.

Keywords: Public debt; Keynesian OLG model; secular stagnation; structural liquidity trap; dynamic efficiency; confidence (search for similar items in EconPapers)
JEL-codes: E22 E62 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pke
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Citations: View citations in EconPapers (2)

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