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Public debt and full employment in a stock-flow consistent model of a corporate economy

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  • Soon Ryoo

    ()
    (Adelphi University)

  • Peter Skott

    ()
    (University of Massachusetts Amherst)

Abstract

This paper examines the fiscal requirements for continuous full employment. We find that (i) changes in the financial behavior of households and firms require adjustments in tax rates and public debt, (ii) the stability of the steady-state solution for public debt depends on the .fiscal instrument and the household consumption function, (iii) in stable cases, a fall in government consumption (or a decline in another component of autonomous demand) requires an increase in the steady-state ratio of public debt to capital, and (iv) the steady-state tax rate may be positively or negatively related to the level of debt. JEL Categories: E62, E22

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Bibliographic Info

Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2011-26.

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Date of creation: Oct 2011
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Handle: RePEc:ums:papers:2011-26

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Keywords: Public debt; stock-flow consistency; corporate economy; full employment;

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References

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  1. Peter Skott, 2008. "Theoretical and empirical shortcomings of the Kaleckian investment function," UMASS Amherst Economics Working Papers 2008-11, University of Massachusetts Amherst, Department of Economics, revised Dec 2009.
  2. Eckhard Hein & Marc Lavoie & Till van Treeck, 2012. "Harrodian Instability And The ‘Normal Rate’ Of Capacity Utilization In Kaleckian Models Of Distribution And Growth—A Survey," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 139-169, 02.
  3. Peter Skott, . "Demand Policy in the Long Run," Economics Working Papers 2000-17, School of Economics and Management, University of Aarhus.
  4. Jan Kregel, 2010. "Fiscal Responsibility: What Exactly Does It Mean?," Economics Working Paper Archive wp_602, Levy Economics Institute.
  5. Peter Skott & Takeshi Nakatani, 2006. "Japanese growth and stagnation: a Keynesian perspective," UMASS Amherst Economics Working Papers 2006-04, University of Massachusetts Amherst, Department of Economics.
  6. Paul Davidson, 2010. "Making dollars and sense of the U.S. government debt," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 32(4), pages 661-666, July.
  7. Wynne Godley & Marc Lavoie, 2007. "Fiscal Policy in a Stock-Flow Consistent (SFC) Model," Economics Working Paper Archive wp_494, Levy Economics Institute.
  8. Peter Skott, Ben Zipperer, 2010. "An empirical evaluation of three post Keynesian models," UMASS Amherst Economics Working Papers 2010-08, University of Massachusetts Amherst, Department of Economics.
  9. Yeva Nersisyan & L. Randall Wray, 2010. "Deficit Hysteria Redux? Why We Should Stop Worrying About U.S. Government Deficits," Economics Public Policy Brief Archive ppb_111, Levy Economics Institute.
  10. Peter Skott & Soon Ryoo, 2007. "Macroeconomic implications of financialization," UMASS Amherst Economics Working Papers 2007-08, University of Massachusetts Amherst, Department of Economics.
  11. Peter Skott, 2011. "Increasing inequality and financial instability," UMASS Amherst Economics Working Papers 2011-20, University of Massachusetts Amherst, Department of Economics.
  12. Soon Ryoo, 2009. "Long waves and short cycles in a model of endogenous financial fragility," UMASS Amherst Economics Working Papers 2009-03, University of Massachusetts Amherst, Department of Economics.
  13. Skott,Peter, 1989. "Conflict and Effective Demand in Economic Growth," Cambridge Books, Cambridge University Press, number 9780521365963, October.
  14. Peter Skott & Soon Ryoo, 2011. "Public debt in an OLG model with imperfect competition," UMASS Amherst Economics Working Papers 2011-25, University of Massachusetts Amherst, Department of Economics.
  15. Asada, Toichiro & Chiarella, Carl & Flaschel, Peter & Mouakil, Tarik & Proaño, Christian R., 2010. "Stabilizing an unstable economy: On the choice of proper policy measures," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(21), pages 1-43.
  16. Schlicht, Ekkehart, 2004. "Public Debt as Private Wealth," Discussion Papers in Economics 371, University of Munich, Department of Economics.
  17. Philip Arestis & Malcolm Sawyer, 2010. "The return of fiscal policy," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 32(3), pages 327-346, April.
  18. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2010. "The future of public debt: prospects and implications," BIS Working Papers 300, Bank for International Settlements.
  19. Thomas I. Palley, 2010. "The Simple Macroeconomics of Fiscal Austerity, Public Sector Debt and Deflation," IMK Working Paper 8-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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Citations

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Cited by:
  1. Eugenio Caverzasi & Antoine Godin, 2013. "Stock-flow Consistent Modeling through the Ages," Economics Working Paper Archive wp_745, Levy Economics Institute.
  2. Peter Skott & Soon Ryoo, 2012. "Public Debt and Functional Finance in an OLG Model with Imperfect Competition," UMASS Amherst Economics Working Papers 2012-10, University of Massachusetts Amherst, Department of Economics.
  3. Peter Skott & Soon Ryoo, 2013. "Public debt in an OLG model with imperfect competition: long-run effects of austerity programs and changes in the growth rate," UMASS Amherst Economics Working Papers 2013-10, University of Massachusetts Amherst, Department of Economics.

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