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Dammann, Felix, Rodosthenous, Néofytos and Villeneuve, Stéphane
(2023)
Debt management game and debt ceiling.
TSE Working Paper, n. 23-1430, Toulouse
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Official URL : http://tse-fr.eu/pub/128069
Abstract
We introduce a non zero-sum game between a government and a legislative body to study the optimal level of debt. We succeed in characterising Nash equilibria in the class of Skorokhodreflection policies which implies that the legislator imposes a debt ceiling. In addition, we highlight the importance of the time preferences in the magnitude of the optimal level of the statutory debt ceiling. In particular, we show that laissez-faire policy can be optimal for high values of the legislator’s discount rate.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | April 2023 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | non-zero-sum game, singular stochastic control, free-boundary problem, debt-to-GDP ratio |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse Capitole |
| Site: | UT1 |
| Date Deposited: | 04 May 2023 08:24 |
| Last Modified: | 04 Nov 2024 12:04 |
| OAI Identifier: | oai:tse-fr.eu:128069 |
| URI: | https://publications.ut-capitole.fr/id/eprint/47807 |
