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Sustainable debt and deficits in emerging markets

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  • Goyal, Ashima

Abstract

Rising deficits and high debt ratios characterized currency crises in countries with low private savings rates and low population densities. But in emerging markets with large population transferring to more productive employment, sustainable debts and deficits may be higher. Debt ratios fall with growth rates. Higher private savings can compensate for government dissaving. An optimizing model of such an economy with dualistic labour markets and two types of consumers demonstrates these features but also shows debt ratios tend to rise in high growth phases. Policy conclusions for fiscal consolidation and coordination with monetary policy are derived in the Indian context.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40100.

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Date of creation: 2010
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Publication status: Published in International Journal of Trade and Global Markets 2.4(2010): pp. 113-136
Handle: RePEc:pra:mprapa:40100

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Keywords: Deficits; Debt; Sustainability; Monetary-Fiscal Policy; Emerging Markets;

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References

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  1. Jordi Galí & J.David López-Salidoz & Javier Vallés, 2004. "Understanding the Effects of Government Spending on Consumption," CFS Working Paper Series 2004/23, Center for Financial Studies.
  2. Davig, Troy & Leeper, Eric M., 2009. "Monetary-Fiscal Policy Interactions and Fiscal Stimulus," CEPR Discussion Papers 7509, C.E.P.R. Discussion Papers.
  3. Ashima Goyal, 2008. "The Natural Interest Rate in Emerging Markets," Working Papers id:1675, eSocialSciences.
  4. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
  5. Richard Clarida & Jordi Gali & Mark Gertler, 2001. "Optimal Monetary Policy in Closed versus Open Economies: An Integrated Approach," NBER Working Papers 8604, National Bureau of Economic Research, Inc.
  6. Ashima Goyal, 2008. "The Structure of Inflation, Information and Labour Markets - Implications for monetary policy," Macroeconomics Working Papers 22378, East Asian Bureau of Economic Research.
  7. Barbara Annicchiarico & Giancarlo Marini & Alessandro Piergallini, 2008. "Monetary Policy and Fiscal Rules," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 4.
  8. repec:bla:restud:v:72:y:2005:i:3:p:707-734 is not listed on IDEAS
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Cited by:
  1. Goyal, Ashima, 2011. "A general equilibrium open economy model for emerging markets: Monetary policy with a dualistic labor market," Economic Modelling, Elsevier, vol. 28(3), pages 1392-1404, May.
  2. Ashima Goyal & Shruti Tripathi, 2012. "Stability and policy rules in emerging markets," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-004, Indira Gandhi Institute of Development Research, Mumbai, India.
  3. Ashima Goyal, 2010. "Exchange Rate Regimes and Macroeconomic Performance in South Asia," Working Papers id:2545, eSocialSciences.

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