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Fiscal Policy after the Financial Crisis$
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Alberto Alesina and Francesco Giavazzi

Print publication date: 2013

Print ISBN-13: 9780226018447

Published to Chicago Scholarship Online: September 2013

DOI: 10.7208/chicago/9780226018584.001.0001

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Game Over Simulating Unsustainable Fiscal Policy

Game Over Simulating Unsustainable Fiscal Policy

Chapter:
(p.176) (p.177) 5 Game Over Simulating Unsustainable Fiscal Policy
Source:
Fiscal Policy after the Financial Crisis
Author(s):

Richard W. Evans

Laurence J. Kotlikoff

Kerk L. Phillips

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226018584.003.0006

This chapter uses a stochastic general equilibrium model to determine how long it takes for unsustainable fiscal policy to produce game over—the point where the policies can no longer be maintained. When the economy reaches game over, the government is forced to default on its promised payment to the contemporaneous elderly. A commentary is also included at the end of the chapter.

Keywords:   fiscal policy, stochastic model, sustainability, default

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