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A bit of Keynesian debt-to-GDP arithmetic for deficit-capped countries

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  • Stefano di Bucchianico

    (Department of Economics, Roma Tre University)

Abstract

This paper expands some recent Keynesian debt-to-GDP arithmetic exercises in three respects. Firstly, it analyses the output and capacity losses associated with a ‘balanced budget’ fiscal policy. Secondly, the possible Keynesian features of a policy looking at the difference between the growth rate and the interest rate are also discussed, showing a condition which allows for a debt-to-GDP ratio reduction via primary deficit spending. Lastly, the minimum necessary fiscal multiplier values needed to make austerity policy counterproductive are calculated for the PIGS economies covering the 1998 – 2018 period. The results show the substantial case for the Keynesian arithmetic to hold.

Suggested Citation

  • Stefano di Bucchianico, 2019. "A bit of Keynesian debt-to-GDP arithmetic for deficit-capped countries," Bulletin of Political Economy, Bulletin of Political Economy, vol. 13(1), pages 55-83, June.
    • Handle: RePEc:awu:journl:v:13:y:2019:i:1:p:55-83
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    Cited by:

    1. Stefano Di Bucchianico, 2021. "Negative Interest Rate Policy to Fight Secular Stagnation: Unfeasible, Ineffective, Irrelevant, or Inadequate?," Review of Political Economy, Taylor & Francis Journals, vol. 33(4), pages 687-710, October.
    2. Di Bucchianico, Stefano, 2021. "Inequality, household debt, ageing and bubbles: A model of demand-side Secular Stagnation," IPE Working Papers 160/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

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    More about this item

    Keywords

    Public debt; debt-to-GDP ratio; fiscal policy; fiscal multiplier;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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