01889cas a2200265 a 4500 AALejournalIMF000299 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451928778 1018-5941 BD-DhAAL BD-DhAAL Symansky, Steven. Government Debt, Life-Cycle Income and Liquidity Constrains : Beyond Approximate Ricardian Equivalence / Steven Symansky, Douglas Laxton, Hamid Faruqee. Washington, D.C. : International Monetary Fund, 1996. 1 online resource (30 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Evans (1991) has demonstrated that Blanchard's (1985) finite-horizon model obeys approximate Ricardian equivalence. We show that this result is determined largely by an unrealistic assumption that labor income grows monotonically over a consumer's entire lifetime. Introducing more realistic lifetime earnings profiles, we find that the effects of government debt on the real interest rate and the capital stock become considerably larger. In particular, leaving aside the effects of distortionary capital taxation, the extended model with liquidity constraints predicts that real interest rates would decline by about 150-200 basis points if government debt were eliminated completely in all OECD countries. Mode of access: Internet Faruqee, Hamid. Laxton, Douglas. IMF Working Papers; Working Paper ; No. 1996/140 Full text available on IMF http://elibrary.imf.org/view/journals/001/1996/140/001.1996.issue-140-en.xml IMF e-Library