Joint work with Andrew Hughes Hallett and Thorsteinn Sveinsson has led to a new discussion paper, entitled “Changing Demographics and Optimal Public Debt: A Steady State Analysis”.
An earlier version of the paper was presented at a workshop in Helsinki last month. The workshop, “Economic Aspects of Demographic Change”, was organized jointly by MoPAct and the Research Institute of the Finnish Economy (ETLA).
The paper develops an overlapping generations model to evaluate the growth-maximizing level of public debt, and it is shown how this level varies as a function of an increase in longevity and a fall in the birth rate, respectively.
The paper also shows how fiscal rules designed to stabilise the economy around the optimal debt level vary with the population parameters. Finally, it is shown how the model performs as a plausible representation of an OECD type economy.
You can download the paper
here. Comments are most welcome!
A list of my other papers in pipeline can be seen here. Examples of ongoing projects can be found here. And a selection of recently published articles in journals and books can be found here.