Deep Habits and the Macroeconomic Effects of Government Debt
Mardi | 2011-03-29 B103 Rym ALOUI In this paper, we study the effects of government debt on macroeconomic aggregates in a non-Ricardian framework. We develop a micro-founded framework which combines time-varying markups, endogenous labor supply and overlapping generations based on in…nitely-lived families. The main contribution of this paper is to provide a new transmission mechanism of public debt through the countercyclical markup movements induced by external deep habits. We analyze the e¤ects of debt-…nanced tax cuts. We show that the […]