A Case Where Barro Expectations Are Not Rational

Schlicht, Ekkehart (Januar 2012): A Case Where Barro Expectations Are Not Rational. Münchener Wirtschaftswissenschaftliche Beiträge (VWL) 2012-4

Abstract

This note generalizes Feldstein’s (1976) criticism of Barro’s(1974) analysis for the case that the interest rate exceeds the growth rate. This is done by considering an economy in steady state where all agents hold “Barro expectations”: they believe that government debt must necessarily be repaid and therefore leave the present value of their income streams unchanged. In this scenario, a change in the mode of taxation affects the present value of disposable income in the private sector. This violates their Barro expectations.

• Dokumententyp: Paper
• Keywords: Barro-Ricardo equivalence, Ricardian equivalence, fiscal policy, debt, taxation, rational expectations
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Munich Discussion Papers in Economics ; Volkswirtschaft > Lehrstühle > Seminar für Theorie und Politik der Einkommensverteilung (aufgelöst)
• Themengebiete: 300 Sozialwissenschaften > 300 Sozialwissenschaft, Soziologie ; 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: E2, E12, E6, H6
• Sprache: Englisch

Literaturliste

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Feldstein, M. (1976). Perceived Wealth in Bonds and Social Security. Journal of Political Economy, 84(2): 331–36. URL http://www.jstor.org/pss/1831904.

Romer, D. (1995). Advanced Macroeconomics. McGraw-Hill. URL http://www.amazon.de/dp/0070536678.

Schlicht, E. (2006). Public Debt as Private Wealth. Metroeconomica: 594–520. URL http://epub.ub.uni-muenchen.de/2143/1/schlicht-public-debt-13-RP.pdf.