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On the Determination of the Public Debt

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  • Barro, Robert J

Abstract

A public debt theory is constructed in which the Ricardian invariance theorem is valid as a first-order proposition but where the dependence of excess burden on the timing of taxation implies an optimal time path of debt issue. A central proposition is that deficits are varied in order to maintain expect ed constancy in tax rates. This behavior implies a positive effect on debt issue of temporary increases in government spending (as in wartime) a countercyclical response of debt to temporary income movements, and a one-to-one effect of expected inflation on nominal debt growth. Debt issue would be invariant with the outstanding debt-income ratio and, except for a minor effect, with the level of government spending. Hypotheses are tested on U.S. data since World WXar1. Results are basically in accord Fith the theory. It also turns out that a small set of explanatory variables can account for the principal movements in interest-bearing federal debt since the 1920s.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 87 (1979)
Issue (Month): 5 (October)
Pages: 940-71

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Handle: RePEc:ucp:jpolec:v:87:y:1979:i:5:p:940-71

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  1. Barro, Robert J. & Fischer, Stanley, 1976. "Recent developments in monetary theory," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 133-167, April.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Should We Panic Over the Level of Federal Debt?
    by ProGrowthLiberal in EconoSpeak on 2011-05-29 17:24:00
  2. A Few Critiques of Tim Taylor’s Historical Review of U.S. Government Deficits
    by ProGrowthLiberal in EconoSpeak on 2012-12-06 17:08:00
  3. The long run government debt target
    by Mainly Macro in Mainly Macro on 2013-01-11 18:11:00
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