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DISCUSSANT'S COMMENTS
Author(s) -
Halton J.
Publication year - 1992
Publication title -
australian journal on ageing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.63
H-Index - 34
eISSN - 1741-6612
pISSN - 0726-4240
DOI - 10.1111/j.1741-6612.1992.tb00543.x
Subject(s) - citation , library science , health care , computer science , operations research , political science , law , engineering
If we are to understand the role of debt, and especially government debt, in the economy, the starting point has to be macroeconomic models that admit financial frictions. And these frictions must create market imperfections both atemporally and intertemporally. Furthermore, debt has to matter both in the private and in the public sphere. To put it more generally, we need to understand why the Modigliani-Miller theorem fails and why Ricardian equivalence fails. Without models that admit financial frictions and a clear role for both public and private debt, we cannot start to understand why the structure and size of central bank balance sheets matter, nor can we understand why the maturity structure of government finances should have an impact on aggregate activity.