Public Debt, Interest Rates, and Negative Shocks
Event details
| Date | 06.12.2019 |
| Hour | 10:30 › 12:00 |
| Speaker | Rick EVANS, University of Chicago |
| Location | |
| Category | Conferences - Seminars |
This paper studies the broadly measured costs and risks of public debt when it is possible for the government to default. I find that increasing public debt can pose significant macroeconomic and individual welfare risks when rare negative events are possible. These results contrast with recent studies that have argued that the costs of public debt might be low in environments in which interest rates are low for prolonged periods. I use a two-period overlapping generations model with aggregate shocks and a lump sum pay-as-you-go government transfer system to study this question.
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