Showing papers by "Francisco J. Buera published in 2000"
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TL;DR: In this article, risk free bonds of dierent maturities can be used to replace state contingent debt in a general equilibrium dynamic optimal taxation problem, and the optimal maturity structure does depend on the rela- tionship between the term strucutre of interest rates and goverenment expenditures.
Abstract: In this paper we show how risk free bonds of dierent maturities can be used to replace state contingent debt in a general equilibrium dynamic optimal taxation problem. In particular, we show that if the state of the economy can only take a …nite number N of values each period, then the government can support the complete markets Ram- sey allocation issuing bonds of JN dierent maturities. We also show that the optimal maturity structure does depend on teh rela- tionship between the term strucutre of interest rates and goverenment expenditures. In the case that intreset rates are positively correlated with government expenditures in the Ramsey solution, then the gov- ernment must hold short run assets and long term liabilites.
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