Spending and Growth: A Modified Debt to GDP Dynamic Model
AbstractThe paper addresses a topical issue – how expansionary fiscal policy affects the debt to GDP ratio. It examines whether the projected future economic growth (stimulated by government spending) is sustained with the resulting national debt. It is discussedif government investment in infrastructure is an effective approach to boost the economy in times of economic downturn. The authors develop the debt to GDP ratio dynamics model and perform a series of simulations (based on US data) to forecast the evolution of the debt to GDP ratio over a 10-year horizon. It is shown that for the data characterizing the current state of the U.S. economy the government investment in infrastructure cannot decrease the debt to GDP ratio.
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Bibliographic InfoArticle provided by Technological Educational Institute (TEI) of Kavala, Greece in its journal International Journal of Economic Sciences and Applied Research (IJESAR).
Volume (Year): 6 (2013)
Issue (Month): 3 (December)
debt dynamics; debt to GDP ratio dynamics; investment in infrastructure; stimulus;
Find related papers by JEL classification:
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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