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Finite horizons, intertemporal substitution and fiscal policy

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  • David Alan Aschauer

Abstract

This article synthesizes two strands of current macroeconomic research in fiscal policy by allowing for finite lifetimes in an intertemporal substitution model. Among other things, the article establishes that in such a model, public debt issuance is contractionary with respect to current output, a conclusion in strong contrast with conventional macroeconomic analysis.
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Suggested Citation

  • David Alan Aschauer, 1987. "Finite horizons, intertemporal substitution and fiscal policy," Staff Memoranda 87-8, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhsm:87-8
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    References listed on IDEAS

    as
    1. Jacob A. Frenkel & Assaf Razin, 1986. "Fiscal Policies and Real Exchange Rates in the World Economy," NBER Working Papers 2065, National Bureau of Economic Research, Inc.
    2. Mankiw, N Gregory & Summers, Lawrence H, 1986. "Money Demand and the Effects of Fiscal Policies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 415-429, November.
    3. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-127, March.
    4. Hoelscher, Gregory, 1986. "New Evidence on Deficits and Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 1-17, February.
    5. Feldstein, Martin, 1982. "Government deficits and aggregate demand," Journal of Monetary Economics, Elsevier, vol. 9(1), pages 1-20.
    6. Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-594, June.
    7. Hausman, Jerry & Ruud, Paul, 1984. "Family Labor Supply with Taxes," American Economic Review, American Economic Association, vol. 74(2), pages 242-248, May.
    8. Barro, Robert J., 1976. "Rational expectations and the role of monetary policy," Journal of Monetary Economics, Elsevier, vol. 2(1), pages 1-32, January.
    9. Yatchew, Adonis J, 1985. "Labor Supply in the Presence of Taxes: An Alternative Specification," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 27-33, February.
    10. Evans, Paul, 1985. "Do Large Deficits Produce High Interest Rates?," American Economic Review, American Economic Association, vol. 75(1), pages 68-87, March.
    11. Mascaro, Angelo & Meltzer, Allan H., 1983. "Long- and short-term interest rates in a risky world," Journal of Monetary Economics, Elsevier, vol. 12(4), pages 485-518, November.
    12. Makin, John H, 1983. "Real Interest, Money Surprises, Anticipated Inflation and Fiscal Deficits," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 374-384, August.
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    Economics; Fiscal policy;

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