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The B.E. Journal of Macroeconomics

Editor-in-Chief: Cavalcanti, Tiago / Kambourov, Gueorgui

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Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games under Uncertainty

Olivier Blanchard
  • 1MIT and NBER,
/ Philippe Weil
  • 2Université Libre de Bruxelles (ECARES), CEPR and NBER,
Published Online: 2001-11-27 | DOI: https://doi.org/10.2202/1534-6013.1031

In a dynamically efficient economy, can a government roll its debt forever and avoid the need to raise taxes? In a series of examples of economies with zero growth, this paper shows that such Ponzi games may be infeasible even when the average rate of return on bonds is negative, and may be feasible even when the average rate of return on bonds is positive. The paper then reveals the structure which underlies these examples.

Keywords: dynamic efficiency; riskless rate; ponzi games

About the article

Published Online: 2001-11-27

Citation Information: Advances in Macroeconomics, ISSN (Online) 1534-6013, DOI: https://doi.org/10.2202/1534-6013.1031. Export Citation

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