This paper reports the results from a laboratory experiment designed to study political distortions in the accumulation of public debt. A legislature bargains over the levels of a public good and of district specific transfers in two periods. The legislature can issue or purchase risk-free bonds in the first period and the level of public debt creates a dynamic linkage across policymaking perio...

To what extent is public debt private liquidity? Much policy advice given in the aftermath of the financial crisis rests on the assumption that increasing public debt relaxes borrowing constraints of private households. This is the case for ad-hoc debt limits, which are exogenous to public policy. Instead, if debt limits are fully endogenous, as e.g. in the case of the natural borrowing limit, ...

There are many studies that look into the relationship between public debt and economic growth. It is hard to find, however, research addressing the role of corruption between these two variables. Noticing this vacancy in current literature, we strive to investigate the effect of corruption on the relationship between public debt and economic growth. For this purpose, the pooled ordinary least ...

In 2007, Greece's public debt was 103% of GDP (gross domestic product). This high level explains at least partly why Greece has been particularly affected by the crisis. This is why we deal with the period before the outbreak of the crisis (1988-2007). The public debt having this characteristic to transmit itself from one year to another, much of the current debt is the heir of past development...

We reevaluate fi scal illusion in local public fi nance. The Ricardian Equivalence Theorem suggests that the fi nancing of a public program using either taxation or debt shouldn’t affect outcomes, because debt is capitalized into property values. In contrast, we show individuals may rationally prefer public debt if governments can borrow on more favorable terms. We also propose a new test for t...

The paper explores the implications of different autonomous demands, with differing rates of growth, in a demand-led growth model where policy makers are concerned about the ratios of public sector debt to income and external debt to income. The actual growth rate is explained in terms of the growth rate of aggregate demand, with emphasis in the formation of expectations about growth in the lat...

This paper examines the impact of foreign aid on public sector fiscal behaviour in Côte d’Ivoire. A special interest is the relationship between aid, debt servicing and debt, given that Côte d’Ivoire is a highly indebted country. The theoretical model employed differs from those of previous studies by highlighting the interaction between debt servicing and the other fiscal variables. This model...

While raising debt on behalf of the government, public debt managers need to consider several possibly conflicting objectives and have to find an appropriate combination for government debt taking into account the uncertainty with regard to the future state of the economy. In this paper, we explicitly consider the underlying uncertainties with a complex multi-period stochastic programming model...