Life-Cycles, Dynasties, Savings : Implications for Closed and Small, Open Economies

Author/Editor:

Hamid Faruqee ; Douglas Laxton

Publication Date:

July 1, 2000

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Series:

Working Paper No. 00/126

Subject:

English

Publication Date:

July 1, 2000

ISBN/ISSN:

9781451854893/1018-5941

Stock No:

WPIEA1262000

Format:

Paper

Pages:

40

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