Infinite Debt Rollover in Stochastic Economies

• 成果类型: Article
• 署名作者: Kocherlakota, Narayana R.
• 署名单位: University of Rochester; National Bureau of Economic Research
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA21090
• 发表日期: 2023
• 页码: 1629-1658
• 关键词: distant future; long-run; optimality; RISK; predictability; equilibrium; EXISTENCE; models; rates

摘要

This paper shows that there is more scope for a borrower to engage in a sustainable infinite debt rollover (a Ponzi scheme) when interest/growth rates are stochastic. In this context, I prove that the relevant r vs. g comparison uses the yield rlong to an infinite-maturity zero-coupon bond. I show that rlong is lower than the risk-neutral expectation of the short-term yield when it is variable, and that rlong is close to the minimal realization of the short-term yield when it is highly persistent. The paper applies these results to illustrative heterogeneous agent dynamic stochastic general equilibrium models to obtain similarly weakened sufficient conditions for the existence of public debt bubbles.