TY  - JOUR
AU  - Leeper,Eric M.
AU  - Walker,Todd B.
TI  - Fiscal Limits in Advanced Economies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16819
PY  - 2011
Y2  - February 2011
UR  - http://www.nber.org/papers/w16819
L1  - http://www.nber.org/papers/w16819.pdf
N1  - Author contact info:
Eric M. Leeper
Department of Economics
304 Wylie Hall
Indiana University
Bloomington, IN  47405
Tel: 812/855-9157
Fax: NA
E-Mail: eleeper@indiana.edu

Todd B. Walker
Department of Economics
105 Wylie Hall
Indiana University
Bloomington, IN  47405
E-Mail: walkertb@indiana.edu
AB  - Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved fiscal stress raises the possibility that the economies will hit their fiscal limits where taxes and spending no longer adjust to stabilize debt. In such economies, monetary policy may lose its ability to control inflation and influence the economy in the usual ways. The paper discusses models of fiscal limits and their implications and lays out a research agenda to integrate political economy and empirical considerations with general equilibrium models of monetary and fiscal interactions.
ER  -