Does it Pay to Have a Balanced Government Budget?
This paper presents an endogenous growth model with public capital and public debt. The primary-surplus-to-GDP ratio is set such that it is a positive function of the debt ratio, which is a necessary condition for the intertemporal budget constraint of the government. The paper studies growth and welfare effects of the model, assuming a balanced government budget, and compares the outcome with the scenario where public debt grows in the long run, but at a smaller rate than capital and consumption, and with the scenario where public debt grows at the same rate as capital and consumption.
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Volume (Year): 164 (2008)
Issue (Month): 3 (September)
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- Bohn, H., 1990.
"The Sutainability Of Budget Deficits In A Stochastic Economy,"
Weiss Center Working Papers
6-90, Wharton School - Weiss Center for International Financial Research.
- Bohn, Henning, 1995. "The Sustainability of Budget Deficits in a Stochastic Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 257-271, February.
- Gang Gong & Alfred Greiner & Willi Semmler, 2001. "Growth Effects of Fiscal Policy and Debt Sustainability in the EU," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 28(1), pages 3-19, March.
- Ghosh, Sugata & Mourmouras, Iannis A., 2004. "Endogenous growth, welfare and budgetary regimes," Journal of Macroeconomics, Elsevier, vol. 26(4), pages 623-635, December.
- Heinemann, Friedrich, 2002. "Factor Mobility, Government Debt and the Decline in Public Investment," ZEW Discussion Papers 02-19, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Barro, Robert J., 1979.
"On the Determination of the Public Debt,"
3451400, Harvard University Department of Economics.
- Friedrich Heinemann, 2006. "Factor mobility, government debt and the decline in public investment," International Economics and Economic Policy, Springer, vol. 3(1), pages 11-26, April.
- Futagami, Koichi & Iwaisako, Tatsuro & Ohdoi, Ryoji, 2008. "Debt Policy Rule, Productive Government Spending, And Multiple Growth Paths," Macroeconomic Dynamics, Cambridge University Press, vol. 12(04), pages 445-462, September.
- Greiner, Alfred & Semmler, Willi, 2000. "Endogenous Growth, Government Debt and Budgetary Regimes," Journal of Macroeconomics, Elsevier, vol. 22(3), pages 363-384, July.
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