On the Determination of the Public Debt
AbstractA 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 InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3451400.
Date of creation: 1979
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Publication status: Published in Journal of Political Economy -Chicago-
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- Barro, Robert J. & Fischer, Stanley, 1976. "Recent developments in monetary theory," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 133-167, April.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Should We Panic Over the Level of Federal Debt?
by ProGrowthLiberal in EconoSpeak on 2011-05-29 17:24:00
- A Few Critiques of Tim Taylors Historical Review of U.S. Government Deficits
by ProGrowthLiberal in EconoSpeak on 2012-12-06 17:08:00
- The long run government debt target
by Mainly Macro in Mainly Macro on 2013-01-11 18:11:00
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- Quantitative Macroeconomics and Real Business Cycles (QM&RBC)
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