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Financial globalization and the raising of public debt

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Author Info

  • Marina Azzimonti

    (Federal Reserve Bank of Philadelphia)

  • Eva de Francisco

    ()
    (Department of Economics, Towson University)

  • Vincenzo Quadrini

    (Department of Economics, University of Southern California)

Abstract

During the last three decades the stock of government debt has increased in most developed countries. During the same period inter- national capital markets have been liberalized. In this paper we de- velop a two-country political economy model with incomplete markets and endogenous government borrowing and show that countries choose higher levels of public debt when nancial markets are internationally integrated.

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File URL: http://www.towson.edu/cbe/economics/workingpapers/2011-03.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Towson University, Department of Economics in its series Working Papers with number 2011-03.

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Length: 33 pages
Date of creation: Mar 2011
Date of revision: Mar 2011
Handle: RePEc:tow:wpaper:2011-03

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Postal: Towson, Maryland 21252-0001
Phone: 410-704-2959
Fax: 410-704-3424
Web page: http://www.towson.edu/cbe/economics/
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  1. Marco Battaglini & Steve Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," Levine's Bibliography 122247000000001094, UCLA Department of Economics.
  2. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," NBER Working Papers 11996, National Bureau of Economic Research, Inc.
  3. Ilzetzki, Ethan, 2006. "Rent seeing distortions and fiscal procyclicality," MPRA Paper 8726, University Library of Munich, Germany, revised 01 Dec 2007.
  4. Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2004. "When it rains, it pours: Procyclical capital flows and macroeconomic policies," MPRA Paper 13883, University Library of Munich, Germany.
  5. Emannauel Farhi & Ivan Werning, 2006. "Capital Taxation," 2006 Meeting Papers 455, Society for Economic Dynamics.
  6. Stefania Albanesi & Christopher Sleet, 2006. "Dynamic Optimal Taxation with Private Information," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 1-30.
  7. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "From Financial Crash to Debt Crisis," NBER Working Papers 15795, National Bureau of Economic Research, Inc.
  8. Zheng Song, 2009. "Rotten Parents and Disciplined Children: A Politico-Economic Theory of Public Expenditure and Debt," 2009 Meeting Papers 94, Society for Economic Dynamics.
  9. Caballero, Ricardo J. & Yared, Pierre, 2010. "Future rent-seeking and current public savings," Journal of International Economics, Elsevier, vol. 82(2), pages 124-136, November.
  10. Mikhail Golosov & Narayana Kocherlakota & Aleh Tsyvinski, 2002. "Optimal Indirect and Capital Taxation," NajEcon Working Paper Reviews 391749000000000449, www.najecon.org.
  11. Azzimonti, Marina & de Francisco, Eva & Krusell, Per, 2008. "Production subsidies and redistribution," Journal of Economic Theory, Elsevier, vol. 142(1), pages 73-99, September.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Can DSGE models describe political cohesion?
    by Jason Rave in Macro Matters on 2012-05-28 21:41:00
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Cited by:
  1. Fernando M. Martin, 2013. "Debt, inflation and central bank independence," Working Papers 2013-017, Federal Reserve Bank of St. Louis.

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