Persistent government debt and aggregate risk distribution
| Autor: | Mariano Massimiliano Croce, Thien Tung Nguyen, Steve Raymond |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2021 |
| Předmět: |
040101 forestry
Consumption (economics) Economics and Econometrics 050208 finance Endogenous growth theory Strategy and Management Risk premium 05 social sciences Government debt Downside risk 04 agricultural and veterinary sciences Monetary economics Representative agent ASSET PRICES Fiscal policy FISCAL POLICY ENDOGENOUS GROWTH RISK ASSET PRICES FISCAL POLICY ENDOGENOUS GROWTH RISK Accounting 0502 economics and business Systematic risk Economics 0401 agriculture forestry and fisheries health care economics and organizations Finance |
| Popis: | When government debt is sluggish, consumption exhibits lower expected growth, more long-run uncertainty, and more long-run downside risk. Simultaneously, the risk premium on the consumption claim (Koijen et al. 2010;Lustig et al. 2013) increases and features more positive (adverse) skewness. We rationalize these findings in an endogenous growth model in which fiscal policy is distortionary, the value of innovation depends on fiscal risk, and the representative agent is sensitive to the resulting distribution of consumption risk. Our model suggests that committing to a rapid reduction of the debt-to-output ratio can enhance the value of innovation, aggregate wealth, and welfare. |
| Databáze: | OpenAIRE |
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