The Monetary-Fiscal Mix: Long-Run Implications
AbstractThe long-run dynamics of public deficits and debt are modeled, assuming that public debt competes with capital for limited private savings. The interest costs of the debt are endogenously determined in this market, and the deficit in other budget transactions is a constant fraction of Gross National Product. Simulations with parameter values suggested by recent United States experience show the likelihood of unstable paths, along which debt grows faster than GNP indefinitely.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 780.
Length: 15 pages
Date of creation: Jan 1986
Date of revision:
Publication status: Published in AEA Papers and Proceedings (May 1986), 76(2): 213-218
Note: CFP 645.
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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
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