Fiscal Policy and Asset Prices with Incomplete Markets

• 成果类型: Article
• 署名作者: Gomes, Francisco; Michaelides, Alexander; Polkovnichenko, Valery
• 署名单位: University of London; London Business School; University of Cyprus; Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhs110
• 发表日期: 2013
• 页码: 531
• 关键词: consumption; RISK; INVESTMENT; PARTICIPATION; equilibrium; frictions; taxation; returns; CHOICE; MODEL

摘要

We study the simultaneous impact of fiscal policy decisions on macroeconomic activity, wealth distribution, and asset prices. We consider a general equilibrium, overlapping generations model with incomplete markets and heterogeneous agents, where government debt and capital are imperfect substitutes. Increases in public debt lead to significant increases in the riskless rate and to a reduction in the equity premium, while higher capital income tax rates lead to a higher equity premium. The crowding-out effects (on capital and output) are much higher than in models where government debt and capital are perfect substitutes, which thus ignore households' portfolio reallocation decisions.