Debt dynamics have been a central theme of discussioins in the "Great Recession". The aim of the present paper is to study the persistence of sovereign debt within a business cycle perspective. In order to achieve this result, a Keynesian framework is considered where aggregate demand fluc- tuations generate quantity adjustment within a deflationary environment. Furthermore a regime switching technique, capable of generating bounded and robust endogenous fluctuations, is introduced. The piecewise linearity of the model, along with its discontinuities, obliges to operate with a low dimensional system in order to obtain two analytical results: the robustness of bounded fluctuations, and hence of debt persistence, and the driving role of growth. These results are extended to higher dimensions by means of simulations. Also in this case, the effectiveness of policies is confirmed.

Ferri, P., Tramontana, F., Debt persistence in a deflationary environment: A regime switching model, <<COMPUTATIONAL ECONOMICS>>, 2018; 52 (2): 421-442. [doi:10.1007/s10614-017-9687-3] [http://hdl.handle.net/10807/125053]

Debt persistence in a deflationary environment: A regime switching model

Tramontana, Fabio
2018

Abstract

Debt dynamics have been a central theme of discussioins in the "Great Recession". The aim of the present paper is to study the persistence of sovereign debt within a business cycle perspective. In order to achieve this result, a Keynesian framework is considered where aggregate demand fluc- tuations generate quantity adjustment within a deflationary environment. Furthermore a regime switching technique, capable of generating bounded and robust endogenous fluctuations, is introduced. The piecewise linearity of the model, along with its discontinuities, obliges to operate with a low dimensional system in order to obtain two analytical results: the robustness of bounded fluctuations, and hence of debt persistence, and the driving role of growth. These results are extended to higher dimensions by means of simulations. Also in this case, the effectiveness of policies is confirmed.
Inglese
Ferri, P., Tramontana, F., Debt persistence in a deflationary environment: A regime switching model, <<COMPUTATIONAL ECONOMICS>>, 2018; 52 (2): 421-442. [doi:10.1007/s10614-017-9687-3] [http://hdl.handle.net/10807/125053]
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/125053
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 1
  • ???jsp.display-item.citation.isi??? 1
social impact