Demand-led growth with debt constraints
AbstractThe paper explores the implications of different autonomous demands, with differing rates of growth, in a demand-led growth model where policy makers are concerned about the ratios of public sector debt to income and external debt to income. The actual growth rate is explained in terms of the growth rate of aggregate demand, with emphasis in the formation of expectations about growth in the latter; and the relative importance in this regard of realised aggregate demand growth and autonomous demand growth, the latter being governed by export demand and public sector expenditure. Debt constraints - specifically, the ratio of public sector debt to output and the ratio of external debt to output - become relevant in the determination of the growth rate of government expenditure. The paper explores the likely interactions between debt constraints, the growth rate of aggregate demand and autonomous demand by means of dynamic simulations.
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Bibliographic InfoPaper provided by University of Sydney, School of Economics in its series Working Papers with number 2008-01.
Date of creation: Dec 2008
Date of revision:
government expenditure; debt; Autonomous demand; growth;
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- Sergio Cesaratto & Franklin Serrano & Antonella Stirati, 2003. "Technical Change, Effective Demand and Employment," Review of Political Economy, Taylor and Francis Journals, vol. 15(1), pages 33-52.
- Antonella Palumbo & Attilio Trezzini, 2003. "Growth without normal capacity utilization," European Journal of the History of Economic Thought, Taylor and Francis Journals, vol. 10(1), pages 109-135.
- Nelson H. Barbosa-Filho, 1999. "A Note on the Theory of Demand-Led Growth," SCEPA Working Papers 1999-06, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
- Graham White, 2008. "Growth, Autonomous Demand And A Joint-Product Treatment Of Fixed Capital," Metroeconomica, Wiley Blackwell, vol. 59(1), pages 1-26, 02.
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