Public deficit sustainability, public debt and monetization in an endogenous growth model: an application for Turkey
AbstractThis paper analyzes the long term sustainability of budgetary policies in a general equilibrium framework. The analysis is based on an overlapping generations model where the government fixes a tax rate on factor incomes, conducts unproductive and productive public spendings and determines the weight of public bonds issuance and monetization in deficit financing. A budgetary rule setting the economy on a balanced growth path is considered sustainable. The model is used to evaluate the sustainability of Turkish budgetary policies since 1980. The results show that Turkish budgetary policies became sustainable in the period 1999-2007. Alternative policy simulations show that Turkey could have conducted more expansionnist budget policies without risking sustainability during this period. The model shows also that the negative impact of inflation tax on private capital accumulation is greater than the impact of factor income tax.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4341.
Date of creation: Sep 2010
Date of revision:
Turkey; Budgetary policies;
Find related papers by JEL classification:
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
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