Bielefeld: Center for Mathematical Economics.","ama":"Ferrari G.

Ferrari, G. (2016). *Controlling public debt without forgetting Inflation* (Center for Mathematical Economics Working Papers, 564). Bielefeld: Center for Mathematical Economics.

","ieee":" G. Ferrari, Ferrari, Giorgio. 2016. *Controlling public debt without forgetting Inflation*. Vol. 564. Center for Mathematical Economics Working Papers. Bielefeld: Center for Mathematical Economics.

","default":"Ferrari G (2016) Center for Mathematical Economics Working Papers; 564.Bielefeld: Center for Mathematical Economics.","mla":"Ferrari, Giorgio.

Ferrari, G. (2016). *Controlling public debt without forgetting Inflation* (Center for Mathematical Economics Working Papers). Bielefeld: Center for Mathematical Economics.

"},"author":[{"full_name":"Ferrari, Giorgio","last_name":"Ferrari","id":"32701753","first_name":"Giorgio"}],"language":[{"iso":"eng"}],"document_type":"workingPaper","jel":["C61","H63"],"accept":"1","keyword":["debt-to-GDP ratio","inflation rate","debt ceiling","singular stochastic control","optimal stopping","free-boundary","nonlinear integral equation"],"intvolume":" 564","locked":"1","abstract":[{"lang":"eng","text":"Consider the problem of a government that wants to control its debt-to-GDP\r\n(gross domestic product) ratio, while taking into consideration the evolution of the inflation\r\nrate of the country. The uncontrolled inflation rate follows an Ornstein-Uhlenbeck dynamics\r\nand affects the growth rate of the debt ratio. The level of the latter can be reduced by the\r\ngovernment through fiscal interventions. The government aims at choosing a debt reduction\r\npolicy which minimises the total expected cost of having debt, plus the total expected cost of\r\ninterventions on debt ratio. We model such problem as a two-dimensional singular stochastic\r\ncontrol problem over an infinite time-horizon. We show that it is optimal for the government\r\nto adopt a policy that keeps the debt-to-GDP ratio under an inflation-dependent ceiling. This\r\ncurve is the free-boundary of an associated fully two-dimensional optimal stopping problem, and\r\nit is shown to be the unique solution of a nonlinear integral equation."}],"publication_status":"published","file":[{"date_created":"2016-07-21T08:02:44Z","content_type":"application/x-download","file_name":"IMW_working_paper_564.pdf","relation":"main_file","open_access":1,"file_id":"2904751","date_updated":"2016-07-25T07:22:00Z","success":1,"creator":"weingarten","access_level":"open_access","file_size":"451378"}],"date_created":"2016-07-21T08:17:07Z","place":"Bielefeld","status":"public","year":"2016","oa":1,"publisher":"Center for Mathematical Economics"}]