Please use this identifier to cite or link to this item: http://hdl.handle.net/20.500.12216/288
Title: A NOTE on OPTIMAL DEBT REDUCTION POLICIES
Authors: La Torre, D. 
Marsiglio, S. 
Issue Date: 2019
Publisher: Cambridge University Press
Journal: Macroeconomic Dynamics 
Abstract: We analyze the optimal debt reduction problem in an uncertainty context. The social planner has a finite horizon and seeks to minimize the social costs associated with debt repayment by taking into account not only the short-run costs of the policy, but also the long-run costs associated with the outstanding level of debt. We characterize the optimal policy and the dynamics of the debt-to-GDP ratio, showing that it will decrease over time if economic policy is effective enough. We characterize how the evolution of the debt-to-GDP ratio depends on the main parameters and we present a simple calibration based on Greek data to illustrate the implications of our analysis in real-world setups. © 2019 University Press.
URI: http://hdl.handle.net/20.500.12216/288
DOI: 10.1017/S1365100519000014
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