Playing the Deficit Gamble Easily


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.

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K. Tamegawa, "Playing the Deficit Gamble Easily," Theoretical Economics Letters, Vol. 2 No. 2, 2012, pp. 209-211. doi: 10.4236/tel.2012.22037.

Conflicts of Interest

The authors declare no conflicts of interest.


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