IDEAS home Printed from https://ideas.repec.org/a/bpj/bejmac/v12y2012i1n24.html
   My bibliography  Save this article

The Global Transmission of Government Debt

Author

Listed:
  • Jung Young-Cheol

    (Thompson Rivers University)

  • Quyen Nguyen V.

    (University of Ottawa)

Abstract

The overlapping-generations model à la Diamond is extended into a world of two large open economies to investigate the global transmission effects of government debts. Initially the world economy is in a long-run equilibrium without taxes and government expenditures. The government of one country then makes a transfer to the old generation, and finances the transfer through the issuance of government debts. Thereafter, this government adopts a debt management policy to maintain the debt per young individual at a constant level. The current young generation of the country is better-off if the interest rate is slightly higher than the population growth rate, but is worse-off if the factor share of capital in national income is high. Along the equilibrium path, the welfare of a generation is lower than that of its predecessor in each country. In the long run, the welfare in both countries is lower under the new steady state.

Suggested Citation

  • Jung Young-Cheol & Quyen Nguyen V., 2012. "The Global Transmission of Government Debt," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-24, July.
    • Handle: RePEc:bpj:bejmac:v:12:y:2012:i:1:n:24
    DOI: 10.1515/1935-1690.1762
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/1935-1690.1762
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/1935-1690.1762?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 624-660, June.
    2. Cremers, Emily T. & Sen, Partha, 2008. "The transfer paradox in a one-sector overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1995-2012, June.
    3. Jacob A. Frenkel & Assaf Razin, 1986. "Fiscal Policies and Real Exchange Rates in the World Economy," NBER Working Papers 2065, National Bureau of Economic Research, Inc.
    4. Jean-Pierre Vidal & Philippe Michel & Bertrand Crettez, 1996. "Time preference and labour migration in an OLG model with land and capital," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(4), pages 387-403.
    5. O. Galor & H. M. Polemarchakis, 1987. "Intertemporal Equilibrium and the Transfer Paradox," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(1), pages 147-156.
    6. Ganelli, Giovanni, 2005. "The new open economy macroeconomics of government debt," Journal of International Economics, Elsevier, vol. 65(1), pages 167-184, January.
    7. 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(6), pages 467-467.
    8. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-247, April.
    9. Persson, Torsten, 1985. "Deficits and intergenerational welfare in open economies," Journal of International Economics, Elsevier, vol. 19(1-2), pages 67-84, August.
    10. Neil Rankin & Barbara Roffia, 2003. "Maximum Sustainable Government Debt in the Overlapping Generations Model," Manchester School, University of Manchester, vol. 71(3), pages 217-241, June.
    11. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    12. Fried, Joel & Howitt, Peter, 1988. "Fiscal deficits, international trade and welfare," Journal of International Economics, Elsevier, vol. 24(1-2), pages 1-22, February.
    13. Dornbusch, Rudiger, 1985. "Intergenerational and international trade," Journal of International Economics, Elsevier, vol. 18(1-2), pages 123-139, February.
    14. Ruiz-Tamarit, José Ramón, 2008. "The closed-form solution for a family of four-dimension nonlinear MHDS," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 1000-1014, March.
    15. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
    16. Galor, Oded, 1992. "The Choice of Factor Mobility in a Dynamic World," Journal of Population Economics, Springer;European Society for Population Economics, vol. 5(2), pages 135-144, April.
    17. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-1038, October.
    18. Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-594, June.
    19. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shuanglin Lin, 2000. "Government Debt and Economic Growth in an Overlapping Generations Model," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 754-763, January.
    2. Turnovsky, S., 2000. "Growth in an Open Economy: some Recent Developments," Papers 5, Warwick - Development Economics Research Centre.
    3. Voosholz, Frauke, 2014. "A survey on modeling economic growth. With special interest on natural resource use," CAWM Discussion Papers 69, University of Münster, Münster Center for Economic Policy (MEP).
    4. Weizsäcker, Robert K. von & Wigger, Berthold U., 2001. "Rentenfinanzierung und intergenerationelle Gerechtigkeit : Eine wachstumstheoretische Perspektive," Discussion Papers 606, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
    5. Berthold U. Wigger, 2002. "Social Security and Growth in an Altruistic Economy," German Economic Review, Verein für Socialpolitik, vol. 3(1), pages 53-80, February.
    6. Erling Steigum Jr., "undated". "Fiscal Deficits, Asset Prices and Intergenerational Distribution in an Open Unionized Economy," EPRU Working Paper Series 97-19, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    7. van de Klundert, T.C.M.J. & Smulders, J.A., 1991. "Reconstructing growth theory : A survey," Other publications TiSEM 19355c51-17eb-4d5d-aa66-b, Tilburg University, School of Economics and Management.
    8. Larry E. Jones & Rodolfo E. Manuelli & Henry E. Siu, 2000. "Growth and business cycles," Staff Report 271, Federal Reserve Bank of Minneapolis.
    9. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "The Poverty of Nations: A Quantitative Exploration," NBER Working Papers 5414, National Bureau of Economic Research, Inc.
    10. Aykut Kibritçioglu, 2002. "On the Smithian origins of "new" trade and growth theories," Economics Bulletin, AccessEcon, vol. 2(1), pages 1-15.
    11. Wilson, E.J. & Chaudhri, D.P., 2000. "Endogeneity, Knowledge and Dynamics of Long Run Capitalist Economic Growth," Economics Working Papers wp00-03, School of Economics, University of Wollongong, NSW, Australia.
    12. Alfò, Marco & Carbonari, Lorenzo & Trovato, Giovanni, 2023. "On the effects of taxation on growth: an empirical assessment," Macroeconomic Dynamics, Cambridge University Press, vol. 27(5), pages 1289-1318, July.
    13. Stolpe, Michael, 1995. "Technology and the dynamics of specialization in open economies," Open Access Publications from Kiel Institute for the World Economy 738, Kiel Institute for the World Economy (IfW Kiel).
    14. Julia Korosteleva & Colin Lawson, 2010. "The Belarusian case of transition: whither financial repression?," Post-Communist Economies, Taylor & Francis Journals, vol. 22(1), pages 33-53.
    15. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    16. D.P. Chaudhri & E. Wilson, 2000. "Savings, Investment, Productivity and Economic Growth of Australia 1861–1990: Some Explorations," The Economic Record, The Economic Society of Australia, vol. 76(232), pages 55-73, March.
    17. Jhy-Yuan Shieh & Wen-Ya Chang & Ching-Chong Lai, 2007. "An Endogenous Growth Model Of Capital And Arms Accumulation," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(6), pages 557-575.
    18. Robert W. Arnold, 2003. "Modeling Long-Run Economic Growth: Technical Paper 2003-04," Working Papers 14497, Congressional Budget Office.
    19. Chung-Huang Huang & Deqin Cai, 1994. "Constant-returns endogenous growth with pollution control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(4), pages 383-400, August.
    20. Jones, Larry E. & Manuelli, Rodolfo E., 1995. "Growth and the effects of inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1405-1428, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejmac:v:12:y:2012:i:1:n:24. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.