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Public Debt, Productive Public Spending and Endogenous Growth

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  • Alfred Greiner

Abstract

type="main"> We analyse the effects of public debt in a basic endogenous growth model with productive public spending. We demonstrate that a discretionary policy in general violates the intertemporal government budget constraint along a balanced growth path. A balanced government budget gives a unique saddle point stable growth path. With a rule-based policy, two saddle point stable balanced growth paths can occur, depending on the intertemporal elasticity of substitution of consumption and on the primary surplus policy. Higher debt goes along with smaller long-run growth and we derive a condition such that a deficit-financed increase in public spending raises the growth rate.

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  • Alfred Greiner, 2015. "Public Debt, Productive Public Spending and Endogenous Growth," The Japanese Economic Review, Japanese Economic Association, vol. 66(4), pages 520-535, December.
    • Handle: RePEc:bla:jecrev:v:66:y:2015:i:4:p:520-535
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    File URL: http://hdl.handle.net/10.1111/jere.12077
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    References listed on IDEAS

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    Cited by:

    1. Atsumasa Kondo, 2016. "Sustainability of Public Debt in an AK Model with Complex Tax System," Discussion Papers CRR Discussion Paper Series A: General 21, Shiga University, Faculty of Economics,Center for Risk Research.
    2. Hiraga, Kazuki, 2016. "Fiscal stabilization rule and overlapping generations," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 313-324.
    3. Gautam Negi, 2021. "Fiscal Impulse And Sectoral Output €“ Evidence From Indian States," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 28, pages 151-167, December.

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