Government debt and aggregate stability with endogenous growth: Some general results
نویسنده
چکیده
We consider a general class of endogenous growth models with infinitely lived households and analyze how different budgetary rules affect the stability of the economy. We show that a discretionary fiscal policy implies that the government always violates its inter-temporal budget constraint along a balanced growth path, whereas a balanced budget rule tends to stabilize the economy. A rule based debt policy makes the economy converge to the balanced growth path provided the reaction of the primary surplus to higher public debt is sufficiently large so that the debt to GDP ratio becomes a mean-reverting process. JEL: H6, O4
منابع مشابه
Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax
We analyze how different budgetary rules affect the stability of an economy in a basic endogenous growth model with public debt and a state-dependent consumption tax rate. We show that a discretionary policy implies that the government violates its inter-temporal budget constraint along a balanced growth path, whereas a balanced budget rule guarantees that the economy is stable. A rule based de...
متن کاملMacroeconomic Effects of Government Debt to Banks in Iran
In the Iranian economy, part of the governmentchr('39')s fiscal policies and liabilities is always financed by banks. As government debt to banks increases, the private sectorchr('39')s access to loans and facilities is limited. It can cause undesirable macroeconomic outcomes. This study investigates the macroeconomic effects of government debt on banks in Iran over 1972–2016 by using an SVAR m...
متن کاملThe Macroeconomic Effects of Government Debt in Iran
One of the major problems in Iranian economy is continuous deficit in the budget operating balance due to the non-optimal government size. The government often financed a part of this deficit by debt cearation. Government debts depends on its size and decomposition have variety macroeconomic effects. So, this study investigated the macroeconomic effects of government debt in iran during 1352-13...
متن کاملInstitutional Requirements for Enhancing Financial Stability in Iran
The conditions in which the financial system can continuously provide the necessary services for the proper functioning of the economy is called “financial stability”. In this study, using global experience and Iranian data from 1990 to 2016, an aggregate index of financial stability for Iran has been constructed under the four dimensions of "deposit taker institutions", "macroeconomics", "for...
متن کاملThe Long-Run Relationship between External Government Debt and Economic Growth in Developing Countries with Upper Middle Income Level (Panel Co-integration Approach)
The relationship between external debt and economic growth is one of the important issues in macroeconomics literature and has been considered in empirical studies. So, in this paper the long-run relationship among external government debt and economic growth in 58 selected developing countries for 1985-2018 by applying a pool mean group method which is suggested by Pesaran & Smith. The main em...
متن کامل