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Debt Policy and Economic Growth in a Small Open Economy Model with Productive Government Spending

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  • Koichi Futagami

    ()

  • Takeo Hori
  • Ryoji Ohdoi

Abstract

In this paper, the effects of introducing constraints on government borrowing have been examined by using a continuous-time overlapping generations model of a small open economy. Government placing constraints on the amount of government bonds have been considered outstanding by establishing an upper limit, or target level, for the ratio of government bonds to gross domestic product. First it is shown that there exist multiple steady states in the model small open economy. Next the target level for bonds affecting economic growth rates at the steady states is examined.

Suggested Citation

  • Koichi Futagami & Takeo Hori & Ryoji Ohdoi, 2010. "Debt Policy and Economic Growth in a Small Open Economy Model with Productive Government Spending," Working Papers id:2502, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:2502
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    References listed on IDEAS

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    1. Ghosh, Sugata & Mourmouras, Iannis A., 2004. "Endogenous growth, welfare and budgetary regimes," Journal of Macroeconomics, Elsevier, vol. 26(4), pages 623-635, December.
    2. Bruce, Neil & Turnovsky, Stephen J, 1999. "Budget Balance, Welfare, and the Growth Rate: "Dynamic Scoring" of the Long-Run Government Budget," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(2), pages 162-186, May.
    3. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-247, April.
    4. 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.
    5. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    6. A. Greiner & W. Semmler, 1999. "An endogenous growth model with public capitaland government borrowing," Annals of Operations Research, Springer, vol. 88(0), pages 65-79, January.
    7. 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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    Cited by:

    1. Kobayashi, Keiichiro, 2013. "A Theory of Public Debt Overhang," CIS Discussion paper series 589, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    2. Natia KUTIVADZE, 2011. "Public debt, domestic and external financing, and economic growth," Departmental Working Papers 2011-12, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

    More about this item

    Keywords

    government; borrowing; overlapping; generations; model; positive; amount; asset; holdings; economy;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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