Debt, Deficits, and Finite Horizons
Open accessAbstract
Many issues in macroeconomics, such as the level of the steady state interest rate, or the dynamic effects of government deficit finance, depend crucially on the horizon of economic agents. This paper develops a simple analytical model in which such issues can be examined and in which the horizon of agents is a parameter which can be chosen arbitrarily.The first three sections of the paper characterize the dynamics and steady state of the economy in the absence of a government. The focus is on the effects of the horizon index on the economy. The paper clarifies in particular the separate roles of finite horizons and declining labor income through life in the determination of steady state interest rates.The next three sections study the effects and the role of fiscal policy.The focus is on the effects of deficit finance both in closed and open economies. The paper clarifies the respective roles of government spending, deficits and debt in the determination of interest rates.
The claims and statistics of this paper haven’t been checked yet.
Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.
Integrity signals
Registry
Cites
Statistics
Claims the paper makes
The claims and statistics of this paper haven’t been checked yet.
Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.
Claims other papers make about this one
Each is checked against this paper’s own text: does it say what the citing paper says it does?
Theoretical predictions show that an increase in the birth rate lowers capital accumulation and economic growth both in the two-period overlapping generations framework and in the continuous-time OLG model.
“These findings are broadly consistent with theoretical predictions, which show that an increase in the birth rate lowers capital accumulation and economic growth both in the two-period overlapping generations (OLG) framework (Diamond 1965) and in the continuous-time OLG model (Blanchard 1985, Buiter 1988).”
From Fertility in High-Income Countries: Trends, Patterns, Determinants, and Consequences (2024) · cites this paper as Blanchard 1985
In “The Closed Economy” (page unavailable), Blanchard finds that shorter horizons reduce steady-state capital. But “Section I. The Aggregate Consumption Function” defines the relevant parameter as the probability of death, with births balancing deaths so population remains constant. The paper therefore does not establish that an independent increase in the birth rate lowers capital accumulation or economic growth. (LLM, conf=0.85)
Experimental — accuracy not yet measured
Self-check
Percentages, sums and reported differences re-computed from the paper’s own numbers.
The self-check needs the paper’s full text.
Cites
No references could be resolved yet.
Research works printed but not linked: 3
- - Friedman, Milton. "A Theory of the Consumption Function", Princeton, N.J. Princeton U. Press, 1957.
- Tobin, James. "Life Cycle Saving and Balanced Growth", in "Ten Economic Studies in the Tradition of Irving Fisher", Wiley, N.Y. 1967.
- Wetterstrand, W.H. "Parametric Models for Life Insurance Mortality Data: Gomperty's Law over Time", Transactions of the Society of Actuaries (1983)33, 159-179.
Cited by
Sorted by citations
The Burden of Knowledge and the “Death of the Renaissance Man”: Is Innovation Getting Harder?
JONES, B. F. (2009) · Review of Economic Studies · doi:10.1111/j.1467-937x.2008.00531.x · Cited by 1,058 · see citing works
Uneven growth: automation’s impact on income and wealth inequality
Moll, B., Rachel, L., & Restrepo, P. (2022) · Econometrica · doi:10.3982/ecta19417 · Cited by 148 · see citing works
Fertility in High-Income Countries: Trends, Patterns, Determinants, and Consequences
Bloom, D. E., Kuhn, M., & Prettner, K. (2024) · Annual Review of Economics · doi:10.1146/annurev-economics-081523-013750 · Cited by 42 · see citing works
- Authors
- Blanchard, O. J.
- Corresponding author
- Blanchard, Olivier J.
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 1985-04
- Volume
- 93
- Issue
- 2
- Pages
- 223-247
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W2892228580
- Cited by
- 2,392
- References
- 0
- Citations by year
- 2026: 43 · 2025: 75 · 2024: 60 · 2023: 96 · 2022: 74 · 2021: 67 · 2020: 48 · 2019: 62 · 2018: 67 · 2017: 70 · 2016: 52 · 2015: 61 · 2014: 61 · 2013: 83 · 2012: 75
- FWCI
- 138.92
- Type
- journal article
- Language
- en
- Open access
- green
- www.nber.org
- Locations
- Journal of Political Economy (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Funders
- National Science Foundation
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic theories and models
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Fiscal Policies and Political Economy
- Keywords
- finite horizon, public debt, budget deficit, fiscal policy, government spending, open economy, closed economy
About these checks
Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.
Statistics and arithmetic are recomputed, not judged.
Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.
What counts as a claim ›How we measure confidence ›How we check this ›
Are you an author, or do you see a problem with this page? Request a review
