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A Goldilocks Theory of Fiscal Deficits

Author

Listed:
  • Atif R. Mian
  • Ludwig Straub
  • Amir Sufi

Abstract

This paper proposes a tractable framework to analyze fiscal space and the dynamics of government debt, with a possibly binding zero lower bound (ZLB) constraint. Without the ZLB, a greater primary deficit unambiguously raises debt. However, debt need not explode: When R

Suggested Citation

  • Atif R. Mian & Ludwig Straub & Amir Sufi, 2022. "A Goldilocks Theory of Fiscal Deficits," NBER Working Papers 29707, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29707
    Note: EFG ME
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    Citations

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    Cited by:

    1. Gomez-Gonzalez, Jose E. & Uribe, Jorge M. & Valencia, Oscar M., 2023. "Does economic complexity reduce the probability of a fiscal crisis?," World Development, Elsevier, vol. 168(C).
    2. Michau, Jean-Baptiste & Ono, Yoshiyasu & Schlegl, Matthias, 2023. "Wealth preference and rational bubbles," European Economic Review, Elsevier, vol. 156(C).
    3. Mark A. Aguiar & Manuel Amador & Cristina Arellano, 2023. "Pareto Improving Fiscal and Monetary Policies: Samuelson in the New Keynesian Model," NBER Working Papers 31297, National Bureau of Economic Research, Inc.
    4. Begoña Domínguez & John Quiggin, 2022. "Australia's Fiscal Space: The Role of Public Investment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(3), pages 383-388, September.
    5. Daisuke Miyashita, 2023. "Public debt and income inequality in an endogenous growth model with elastic labor supply," International Journal of Economic Policy Studies, Springer, vol. 17(2), pages 447-472, August.
    6. Jorge M. Uribe, 2023. ""Fiscal crises and climate change"," IREA Working Papers 202303, University of Barcelona, Research Institute of Applied Economics, revised Feb 2023.
    7. Kaldorf, Matthias & Röttger, Joost, 2023. "Convenient but risky government bonds," Discussion Papers 15/2023, Deutsche Bundesbank.
    8. Jean-Baptiste Michau, 2022. "The Trilemma for Low Interest Rate Macroeconomics," Working Papers 2022-19, Center for Research in Economics and Statistics.
    9. Narayana R. Kocherlakota, 2023. "Public Debt Bubbles In Heterogeneous Agent Models With Tail Risk," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 491-509, May.
    10. Heimberger, Philipp, 2023. "Public debt and r-g risks in advanced economies: Eurozone versus stand-alone," Journal of International Money and Finance, Elsevier, vol. 136(C).

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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