Maximum Sustainable Government Debt in the Overlapping Generations Model
AbstractThe theoretical determinants of maximum sustainable government debt are investigated using Diamond's overlapping-generations model. A level of debt is defined to be 'sustainable' if a steady state with non-degenerate values of economic variables exists. We show that a maximum sustainable level of debt almost always exists. Most interestingly, it normally occurs at a 'catastrophe' rather than a 'degeneracy', i.e. where variables such as capital and consumption are in the interiors, rather than at the limits, of their economically meaningful ranges. This means that if debt is increased step by step, the economy may suddenly collapse without obvious warning.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2076.
Date of creation: Feb 1999
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Neil Rankin & Barbara Roffia, 2003. "Maximum Sustainable Government Debt in the Overlapping Generations Model," Manchester School, University of Manchester, vol. 71(3), pages 217-241, 06.
- Rankin, N. & Roffia, B., 1999. "Maximum Sustainable Government Debt in the Overlapping Generations Model," The Warwick Economics Research Paper Series (TWERPS) 521, University of Warwick, Department of Economics.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Futagami, Koichi & Shibata, Akihisa, 1998.
"Budget Deficits and Economic Growth,"
Public Finance = Finances publiques,
, vol. 53(3-4), pages 331-54.
- Arai, Real, 2008.
"Productive government expenditure and fiscal sustainability,"
8553, University Library of Munich, Germany.
- Real Arai, 2011. "Productive Government Expenditure and Fiscal Sustainability," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 67(4), pages 327-351, December.
- Rafal Benecki & Jens Hölscher & Mariusz Jarmuzek, 2006.
"Fiscal Transparency And Policy Rules In Poland,"
65, CENTRE FOR THE STUDY OF ECONOMIC AND SOCIAL CHANGE IN EUROPE,School of Slavonic and East European Studies,University College London (SSEES,UCL).
- Ascari, Guido & Rankin, Neil, 2004.
"Perpetual youth and endogenous labour supply: a problem and a possible solution,"
Working Paper Series
0346, European Central Bank.
- Ascari, Guido & Rankin, Neil, 2007. "Perpetual youth and endogenous labor supply: A problem and a possible solution," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 708-723, December.
- Karl Farmer & Matthias Schelnast, 2013. "Public Debt Reduction in Advanced Countries and Its Impact on Emerging Countries," International Advances in Economic Research, Springer, vol. 19(2), pages 167-188, May.
- de la Croix, David & Michel, Philippe, 1999.
"National Debt Sustainability and the Dynamics in the Economy of Diamond,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
1999015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- de la Croix, D. & Michel, P., 1999. "National Debt Sustainability and the Dynamics in the Economy of Diamond," G.R.E.Q.A.M. 99a56, Universite Aix-Marseille III.
- Ererdem, Ozgür Kaan, 2010. "Public deficit sustainability, public debt and monetization in an endogenous growth model: an application for Turkey," Economics Papers from University Paris Dauphine 123456789/4341, Paris Dauphine University.
- Mark A. Roberts, . "A portfolio explanation of the relationship between macroeconomic volatility and economic growth," Discussion Papers 11/14, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
- Ganelli, Giovanni, 2007.
"Fiscal policy rules in an overlapping generations model with endogenous labour supply,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 31(3), pages 1015-1036, March.
- Giovanni Ganelli, 2002. "Fiscal Policy Rules in an Overlapping Generations Model with Endogenous Labour Supply," Trinity Economics Papers 200215, Trinity College Dublin, Department of Economics.
- Karl Farmer & Jacopo Zotti, 2010. "Sustainable government debt in a two-good, two-country overlapping generations model," International Review of Economics, Springer, vol. 57(3), pages 289-316, September.
- Matteo Formenti, 2008. "Indicators and Tests of Sustainability: The Italian Case," Rivista di Politica Economica, SIPI Spa, vol. 98(6), pages 123-160, November-.
- Miller, Marcus & Rankin, Neil & Zhang, Lei, 2012. "Borrowing from thy neighbour: a European perspective on sovereign debt," CAGE Online Working Paper Series 73, Competitive Advantage in the Global Economy (CAGE).
- Real Arai & Takuma Kunieda & Keigo Nishida, 2014. "Is Public Debt Growth-Enhancing or Growth-Reducing?," KIER Working Papers 884, Kyoto University, Institute of Economic Research.
- Fernández-Huertas Moraga, Jesús & Vidal, Jean-Pierre, 2004.
"Fiscal sustainability and public debt in an endogenous growth model,"
Working Paper Series
0395, European Central Bank.
- Moraga, Jesús Fernández-Huertas & Vidal, Jean-Pierre, 2010. "Fiscal sustainability and public debt in an endogenous growth model," Journal of Pension Economics and Finance, Cambridge University Press, vol. 9(02), pages 277-302, April.
- Lecturer Gheorghița Dincă Ph. D, Assoc. Prof. Marius Sorin Dincă Ph. D, 2011. "The Evolution Of The Romanian Public Debt During The Last 10 Years," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 4(39), pages 100-109, May.
- Karl Farmer, 2011. "Public-Debt Sustainability, Real Exchange Rate, and Country-Specific Saving Rates," International Advances in Economic Research, Springer, vol. 17(1), pages 45-65, February.
- Puhakka , Mikko, 2005. "The effects of aging population on the sustainability of fiscal policy," Research Discussion Papers 26/2005, Bank of Finland.
- Annicchiarico, Barbara & Giammarioli, Nicola, 2004. "Fiscal rules and sustainability of public finances in an endogenous growth model," Working Paper Series 0381, European Central Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.