Irrelevance of government debt with heterogeneous credit restrictions1
نویسندگان
چکیده
Irrelevance of the government debt path has been shown in a variety of models with a representative agent and free access to credit markets. However, this result typically does not hold in the presence of individual borrowing constraints. In the present paper we focus on allocations that maximize social welfare and show that heterogeneity may restore the irrelevance result. The necessary conditions refer to the extent of the restrictions, the size of the set of available tax instruments and the smoothness of the underlying technology.
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