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Spending and Growth: A Modified Debt to GDP Dynamic Model

Author

Listed:
  • Camilla Yanushevsky

    (University of Maryland, Department of Finance, Robert H. Smith School of Business, College Park, 20742, USA)

  • Rafael Yanushevsky

    (Research & Technology Consulting, 5106 Danbury Rd., Bethesda, MD 20814, USA)

Abstract

The paper addresses a topical issue – how expansionary fiscal policy affects the debt to GDP ratio. It examines whether the projected future economic growth (stimulated by government spending) is sustained with the resulting national debt. It is discussedif government investment in infrastructure is an effective approach to boost the economy in times of economic downturn. The authors develop the debt to GDP ratio dynamics model and perform a series of simulations (based on US data) to forecast the evolution of the debt to GDP ratio over a 10-year horizon. It is shown that for the data characterizing the current state of the U.S. economy the government investment in infrastructure cannot decrease the debt to GDP ratio.

Suggested Citation

  • Camilla Yanushevsky & Rafael Yanushevsky, 2013. "Spending and Growth: A Modified Debt to GDP Dynamic Model," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 6(3), pages 21-33, December.
    • Handle: RePEc:tei:journl:v:6:y:2013:i:3:p:21-33
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    debt dynamics; debt to GDP ratio dynamics; investment in infrastructure; stimulus;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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