Controlling public debt without forgetting Inflation

Ferrari G (2016) Center for Mathematical Economics Working Papers; 564.
Bielefeld: Center for Mathematical Economics.

Diskussionspapier | Veröffentlicht | Englisch
 
Download
OA 451.38 KB
Abstract / Bemerkung
Consider the problem of a government that wants to control its debt-to-GDP (gross domestic product) ratio, while taking into consideration the evolution of the inflation rate of the country. The uncontrolled inflation rate follows an Ornstein-Uhlenbeck dynamics and affects the growth rate of the debt ratio. The level of the latter can be reduced by the government through fiscal interventions. The government aims at choosing a debt reduction policy which minimises the total expected cost of having debt, plus the total expected cost of interventions on debt ratio. We model such problem as a two-dimensional singular stochastic control problem over an infinite time-horizon. We show that it is optimal for the government to adopt a policy that keeps the debt-to-GDP ratio under an inflation-dependent ceiling. This curve is the free-boundary of an associated fully two-dimensional optimal stopping problem, and it is shown to be the unique solution of a nonlinear integral equation.
Stichworte
debt-to-GDP ratio; inflation rate; debt ceiling; singular stochastic control; optimal stopping; free-boundary; nonlinear integral equation
Erscheinungsjahr
2016
Serientitel
Center for Mathematical Economics Working Papers
Band
564
Seite(n)
33
ISSN
0931-6558
Page URI
https://pub.uni-bielefeld.de/record/2904750

Zitieren

Ferrari G. Controlling public debt without forgetting Inflation. Center for Mathematical Economics Working Papers. Vol 564. Bielefeld: Center for Mathematical Economics; 2016.
Ferrari, G. (2016). Controlling public debt without forgetting Inflation (Center for Mathematical Economics Working Papers, 564). Bielefeld: Center for Mathematical Economics.
Ferrari, G. (2016). Controlling public debt without forgetting Inflation. Center for Mathematical Economics Working Papers, 564, Bielefeld: Center for Mathematical Economics.
Ferrari, G., 2016. Controlling public debt without forgetting Inflation, Center for Mathematical Economics Working Papers, no.564, Bielefeld: Center for Mathematical Economics.
G. Ferrari, Controlling public debt without forgetting Inflation, Center for Mathematical Economics Working Papers, vol. 564, Bielefeld: Center for Mathematical Economics, 2016.
Ferrari, G.: Controlling public debt without forgetting Inflation. Center for Mathematical Economics Working Papers, 564. Center for Mathematical Economics, Bielefeld (2016).
Ferrari, Giorgio. Controlling public debt without forgetting Inflation. Bielefeld: Center for Mathematical Economics, 2016. Center for Mathematical Economics Working Papers. 564.
Alle Dateien verfügbar unter der/den folgenden Lizenz(en):
Copyright Statement:
Dieses Objekt ist durch das Urheberrecht und/oder verwandte Schutzrechte geschützt. [...]
Volltext(e)
Access Level
OA Open Access
Zuletzt Hochgeladen
2019-09-06T09:18:39Z
MD5 Prüfsumme
70298c6e4e8b670ac5c600a09c54822d

Export

Markieren/ Markierung löschen
Markierte Publikationen

Open Data PUB

Suchen in

Google Scholar