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Playing the Deficit Gamble Easily
School of Commerce, Meiji University, Tokyo, Japan
- 1 School of Commerce, Meiji University, Tokyo, Japan
Theoretical Economics Letters·Volume 02 (2012)·Pages 209–211·Published 23 May 2012·DOI10.4236/tel.2012.22037
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Abstract
In this paper, we attempt to obtain the exact probability distribution of the debt-to-GDP ratio in T years, assuming that 1) the primary balance is zero and 2) the interest rate and the GDP growth rate are given as exogenous random variables. With this approach, researchers can play the “Deficit Gamble” without conducting a Monte Carlo simulation. Calculating the distribution of the debt-to-GDP ratio would be useful for policy planning.
KeywordsDeficit GambleGovernment Debt
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