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The Growth of Public Debt: Sustainability, Fiscal Rules, and Monetary Rules

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  • Luigi Spaventa

    (International Monetary Fund)

Abstract

The paper first addresses the question of the sustainability of debt growth by examining the behavior of taxation implied by fiscal rules that respect a government's intertemporal budget constraint. Sustainable debt growth may require the tax burden to rise above some socially acceptable level. In this case, whereas drastic remedies may prove ineffective, a more relevant choice concerns the degree of monetary financing of the deficit (as distinct from monetization of the debt), which affects the dynamics of taxation implied by the constraint. Monetary financing is then introduced into a model by Blanchard, and the effects of monetary financing on the interest rate and capital intensity are examined. Finally, some policy implications are considered.

Suggested Citation

  • Luigi Spaventa, 1987. "The Growth of Public Debt: Sustainability, Fiscal Rules, and Monetary Rules," IMF Staff Papers, Palgrave Macmillan, vol. 34(2), pages 374-399, June.
  • Handle: RePEc:pal:imfstp:v:34:y:1987:i:2:p:374-399
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    Citations

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    Cited by:

    1. Charles, Sebastien & Dallery, Thomas, 2013. "L’expiation par l’austérité ou la stratégie de l’échec : une interprétation post-keynésienne de la crise des pays périphériques en zone euro
      [Expiation through austerity or the strategy of failure:
      ," MPRA Paper 65735, University Library of Munich, Germany.
    2. Pinaki Chakraborty, 2017. "Federalism, fiscal space, and public investment spending: do fiscal rules impose hard-budget constraints?," Chapters,in: Central and Local Government Relations in Asia, chapter 3, pages 103-129 Edward Elgar Publishing.
    3. Pica, Federico & Villani, Salvatore, 2012. "Debito, Mezzogiorno e sviluppo. A trivial exercise
      [Sovereign Debt Sustainability, Mezzogiorno and Economic Growth. A Trivial Exercise]
      ," MPRA Paper 43199, University Library of Munich, Germany, revised 28 Nov 2012.
    4. Helmut Reisen, 1991. "Dette publique, compétitivité extérieure et discipline budgétaire dans les pays en développement," Revue Tiers Monde, Programme National Persée, vol. 32(126), pages 317-342.
    5. Marianna Sávai, 2016. "Short-term Fiscal Sustainability of V4 Countries," European Financial and Accounting Journal, University of Economics, Prague, vol. 2016(3), pages 169-182.
    6. Drudi, Francesco & Prati, Alessandro, 2000. "Signaling fiscal regime sustainability," European Economic Review, Elsevier, vol. 44(10), pages 1897-1930, December.
    7. Jérôme Creel & Henri Sterdyniak, 1995. "Les déficits publics en Europe. Causes, conséquences ou remèdes à la crise ?," Revue Économique, Programme National Persée, vol. 46(3), pages 645-656.
    8. Alessandro Roncaglia, 2013. "Luigi Spaventa," Moneta e Credito, Economia civile, vol. 66(263), pages 219-247.
    9. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69.
    10. Silvana Bartoletto & Bruno Chiarini & Elisabetta Marzano, 2012. "The Sustainability of Fiscal Policy in Italy: A Long-Term Perspective," CESifo Working Paper Series 3812, CESifo Group Munich.
    11. Enzo Croce & V. Hugo Juan-Ramon, 2003. "Assessing Fiscal Sustainability; A Cross-Country Comparison," IMF Working Papers 03/145, International Monetary Fund.

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