Abstract

We consider the implications for optimal fiscal policy when taxes are non-distortionary and households are heterogeneous and borrowing constrained. The main result is that optimal policy keeps some households borrowing constrained in order to reduce interest rates on government debt.

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Citation

Azzimonti, Marina, and Pierre Yared. "A Note on Optimal Fiscal Policy in an Economy with Private Borrowing Limits." Economics Letters 151 (February 2017): 62-65.

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