ADVANCED MACROECONOMICS Lecture 3b Diamond Model 电子科大经管学院马捷
ADVANCED MACROECONOMICS Lecture 3b Diamond Model 电子科大经管学院 马捷 1
Contents ·Background Mathematical Framework ·Dynamics and Speed of Convergence Dynamic Inefficiency Golden Rules 电子科大经管学院马捷 2 元元元元
Contents Background Mathematical Framework Dynamics and Speed of Convergence Dynamic Inefficiency Golden Rules 电子科大经管学院 马捷 2
References David Romer's Advanced Macroeconomics Chapter 2,Part B ·Diamond,Peter(1965).“National debt in a neoclassical growth model." American Economic Review,55,pp. 1026-50. 2021/4/17 3
2021/4/17 3 References • David Romer's Advanced Macroeconomics Chapter 2, Part B • Diamond, Peter (1965). “National debt in a neoclassical growth model.” American Economic Review, 55, pp. 1026-50
Reflects of the debate on the Ricardian equivalence In the 1980s,US had run large budget deficits Traditional view:C~current income 'Budget deficits→C increases→Saving drop→ growth Ricardian Equiv:a shift from tax to bond finance has no influence on capital accumulation During recession periods,government often cut taxes.But if Ricardian equiv holds,these efforts are futile. It is important for us to know which view is closer to the fact. 2021/4/17
2021/4/17 4 In the 1980s, US had run large budget deficits • Traditional view: C~current income Budget deficits C increases Saving drop growth • Ricardian Equiv: a shift from tax to bond finance has no influence on capital accumulation During recession periods, government often cut taxes. But if Ricardian equiv holds, these efforts are futile. It is important for us to know which view is closer to the fact. Reflects of the debate on the Ricardian equivalence
Debate on the Ricardian equivalence Since the implications of the Ramsey model for public finance are so strong,it is worth pausing to consider which assumptions are essential. The debate has centered around Ricardian equivalence. 。Infinite horizon→Diamond's OG model Perfect capital markets>liquidity constraints are key assumptions underlying Ricardian equivalence 2021/4/17 5
2021/4/17 5 Debate on the Ricardian equivalence Since the implications of the Ramsey model for public finance are so strong, it is worth pausing to consider which assumptions are essential. The debate has centered around Ricardian equivalence. • Infinite horizon Diamond’s OG model • Perfect capital markets liquidity constraints are key assumptions underlying Ricardian equivalence