Unfunded liabilities and uncertain fiscal financing

• 成果类型: Article; Proceedings Paper
• 署名作者: Davig, Troy; Leeper, Eric M.; Walker, Todd B.
• 署名单位: Indiana University System; Indiana University Bloomington; Federal Reserve System - USA; Federal Reserve Bank - Kansas City; National Bureau of Economic Research
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2010.05.007
• 发表日期: 2010
• 页码: 600-619
• 关键词: Fiscal sustainability; inflation; Fiscal limit

摘要

A rational expectations framework is developed to study the consequences of alternative means to resolve the unfunded liabilities problem-unsustainable exponential growth in federal Social Security, Medicare, and Medicaid spending with no plan to finance it. Resolution requires specifying a probability distribution for how and when monetary and fiscal policies will change as the economy evolves through the 21st century. Beliefs based on that distribution determine the existence of and the nature of equilibrium. We consider policies that in expectation combine reaching a fiscal limit, some distorting taxation, modest inflation, and some reneging on the government's promised transfers. In the equilibrium, inflation-targeting monetary policy cannot successfully anchor expected inflation. Expectational effects are always present, but need not have a large impacts on inflation and interest rates in the short and medium runs. (C) 2010 Elsevier B.V. All rights reserved.