Tag Archives: Ramsey model

Temporary and Permanent Ricardian Confusion: Going Comfortably Numb

Spurred by the heated debates about the need for fiscal stimulus in the US, the issue of Ricardian Equivalence has taken center stage in the economic blogging sphere recently. While it is an impossible task to identify any exact line of events on the net (and possible also irrelevant), this round appears to have been initiated by an article by Justin Yifu Lin (pdf), Chief Economist of the World Bank, who got criticized here by a balanced Antonio Fatás. Fatás notes, among other things, that Lin’s fears that fiscal stimulus could be caught by the “Ricardian trap” (i.e., neutralized by offsetting increased private savings) are unwarranted. While Lin’s endorsement of … Continue reading

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Simple Policy Rules or Simple Consumption Rules? A Semi-serious Comparison Based on Brain Usage

Let me start this post with a warning. As indicated by the title, it will involve semi-serious thoughts, which in this case is equivalent to semi-humorous thoughts. So the contents are intended as a sort of economists’ joke (which may not be funny to that many, if any, besides me). Also, in order to understand the fun, it will require some knowledge about graduate dynamic macroeconomics, more specifically the continuous-time Ramsey-Kass-Koopmans model. With this warning, I proceed. In recent macroeconomic literature on monetary and fiscal stabilization policies, researchers often characterize the optimal stabilization policy in a conventional public-finance fashion. Then, many argue that such a policy is too complicated to … Continue reading

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