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Public Debt and Price Stability

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  • Carl Christian von Weizsäcker

Abstract

type="main" xml:id="geer12030-abs-0001"> Modernized Austrian capital theory implies: in capital market equilibrium without public debt the average period of production equals the average waiting period of households. In the twenty-first century and for the OECD plus China area, demographic and production parameters are such that capital market equilibrium implies a negative real rate of interest. Price stability implies a non-negative real rate of interest. Prosperity requires capital market equilibrium. Thus, positive public debt is required for price stability under conditions of prosperity. Some conclusions are drawn for actual international macropolicy.

Suggested Citation

  • Carl Christian von Weizsäcker, 2014. "Public Debt and Price Stability," German Economic Review, Verein für Socialpolitik, vol. 15(1), pages 42-61, February.
  • Handle: RePEc:bla:germec:v:15:y:2014:i:1:p:42-61
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    File URL: http://hdl.handle.net/10.1111/geer.2014.15.issue-1
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    References listed on IDEAS

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    1. Kamstra Mark J & Shiller Robert J., 2010. "Trills Instead of T-Bills: It's Time to Replace Part of Government Debt with Shares in GDP," The Economists' Voice, De Gruyter, vol. 7(3), pages 1-5, September.
    2. Bernd Raffelhuschen & Laurence J. Kotlikoff, 1999. "Generational Accounting around the Globe," American Economic Review, American Economic Association, vol. 89(2), pages 161-166, May.
    3. Stefan Homburg, 1991. "Interest and Growth in an Economy with Land," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 450-459, May.
    4. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    5. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
    6. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-360, April.
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    Cited by:

    1. repec:spr:wirtsc:v:97:y:2017:i:4:d:10.1007_s10273-017-2132-3 is not listed on IDEAS
    2. Stefan Homburg, 2017. "Understanding Benign Liquidity Traps: The Case of Japan," German Economic Review, Verein für Socialpolitik, vol. 18(3), pages 267-282, August.
    3. Stefan Homburg & Julia Knolle, 2017. "Das Rätsel der Niedrigzinsphase
      [The Conundrum of Low Interest Rates]
      ," Wirtschaftsdienst, Springer;German National Library of Economics, vol. 97(4), pages 290-293, April.
    4. von Weizsäcker Carl Christian, 2015. "Kapitalismus in der Krise?," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(2), pages 189-212, June.

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