Debts, deficits and growth in interdependent economies
AbstractWe investigate the effects of budgetary policies on growth rates, external debt, real interest rates and the stock market valuation of capital in a two-country, overlapping-generations model of endogenous growth. A worldwide rise in the public debt/GDP ratio, or the share of government consumption, reduces savings and growth. They also increase real interest rates and depress the stock market because of the adjustment costs of investment. A relative rise in one country's debt/GDP ratio or its GDP share of government consumption results in a reduction in its ratio of external assets to GDP. Growth rates are equalized unless there are differences in investment adjustment costs or depreciation rates. Per capita output levels do not necessarily converge.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1991-4.
Date of creation: 1991
Date of revision:
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Web page: http://center.uvt.nl
Economic Growth; National Debt;
Other versions of this item:
- Alogoskoufis, G.S. & Van Der Ploeg, F., 1991. "Debts, Deficits and Growth in Interdependent Economies," Papers 9104, Tilburg - Center for Economic Research.
- Alogoskoufis, George & van der Ploeg, Frederick, 1991. "Debts, Deficits and Growth in Interdependent Economies," CEPR Discussion Papers 533, C.E.P.R. Discussion Papers.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alogoskoufis, George & van der Ploeg, Frederick, 1990. "On Budgetary Policies and Economic Growth," CEPR Discussion Papers 496, C.E.P.R. Discussion Papers.
- Barro, Robert J. & Sala-i-Martin, Xavier, 1992.
"Public Finance in Models of Economic Growth,"
CEPR Discussion Papers
630, C.E.P.R. Discussion Papers.
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- Su, Y-T, 2000. "Economic growth, trade policy and foreign direct investment.," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
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- Casper Ewijk, 1994. "Growth promoting policies, distribution, and the balance of payments," Journal of Economics, Springer, vol. 60(1), pages 55-80, February.
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