Life-Cycles, Dynasties, Savings: Implications for Closed and Small, Open Economies
July 1, 2000
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Summary
This paper examines the macroeconomic implications of life-cycle and dynastic saving behavior for closed and small, open economies. Using an extended version of Blanchard’s overlapping agents model, the analytical framework nests these two competing views, treating agents as either dynastic households or disconnected generations. Calibrating the life-cycle variant using empirical age-earnings profiles, the analysis compares the long-run effects of fiscal policy shocks under both perspectives. The results quantify the implications of life-cycle considerations for the effects of deficit finance on real interest rates and the capital stock or net foreign assets.
Subject: Consumption, Financial services, Income, Labor, National accounts, Public debt, Real interest rates
Keywords: age-earnings profile, asset income, asset income of the household, closed economy variant, Consumption, debt build-up, earnings profile, Global, Government Debt, gross investment, Income, income profile, interest income, labor income, life-cycle income, open economy, profile choose, real interest rate, Real interest rates, Ricardian Equivalence, Saving, WP
Pages:
40
Volume:
2000
DOI:
Issue:
126
Series:
Working Paper No. 2000/126
Stock No:
WPIEA1262000
ISBN:
9781451854893
ISSN:
1018-5941
