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The Growth of Public Debt: Sustainability, Fiscal Rules, and Monetary Rules

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  • Luigi Spaventa

    (International Monetary Fund)

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    Abstract

    The paper first addresses the question of the sustainability of debt growth by examining the behavior of taxation implied by fiscal rules that respect a government's intertemporal budget constraint. Sustainable debt growth may require the tax burden to rise above some socially acceptable level. In this case, whereas drastic remedies may prove ineffective, a more relevant choice concerns the degree of monetary financing of the deficit (as distinct from monetization of the debt), which affects the dynamics of taxation implied by the constraint. Monetary financing is then introduced into a model by Blanchard, and the effects of monetary financing on the interest rate and capital intensity are examined. Finally, some policy implications are considered.

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

    Volume (Year): 34 (1987)
    Issue (Month): 2 (June)
    Pages: 374-399

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    Handle: RePEc:pal:imfstp:v:34:y:1987:i:2:p:374-399

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    Cited by:
    1. Alessandro Prati & Francesco Drudi, 1999. "Signaling Fiscal Regime Sustainability," IMF Working Papers, International Monetary Fund 99/86, International Monetary Fund.
    2. Enzo Croce & V. Hugo Juan-Ramon, 2003. "Assessing Fiscal Sustainability," IMF Working Papers, International Monetary Fund 03/145, International Monetary Fund.
    3. Alessandro Roncaglia, 2013. "Luigi Spaventa," Moneta e Credito, Economia civile, Economia civile, vol. 66(263), pages 219-247.
    4. Pica, Federico & Villani, Salvatore, 2012. "Debito, Mezzogiorno e sviluppo. A trivial exercise
      [Sovereign Debt Sustainability, Mezzogiorno and Economic Growth. A Trivial Exercise]
      ," MPRA Paper 43199, University Library of Munich, Germany, revised 28 Nov 2012.
    5. Silvana Bartoletto & Bruno Chiarini & Elisabetta Marzano, 2012. "The Sustainability of Fiscal Policy in Italy: A Long-Term Perspective," CESifo Working Paper Series 3812, CESifo Group Munich.

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