Working Paper: NBER ID: w15025
Authors: Roger Farmer; Carine Nourry; Alain Venditti
Abstract: We introduce a solution technique for the study of discrete time stochastic models populated by long-lived agents. We introduce aggregate uncertainty and complete markets into a 'perpetual-youth' model of a kind first studied by Olivier Blanchard and we show that the pure-trade version of the model behaves much like the two-period overlapping generations model. Our methods are easily generalized to economies with production and they should prove useful to researchers who seek a tractable stochastic model in which fiscal policy has real effects on aggregate allocations.
Keywords: debt; deficits; fiscal policy; stochastic models
JEL Codes: C10; E0; E6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fiscal policy (E62) | Aggregate economic outcomes (E10) |