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

  • Koichi Futagami

    ()

  • Takeo Hori
  • Ryoji Ohdoi

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.

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File URL: http://www.esocialsciences.org/Download/repecDownload.aspx?fname=Document12752010130.8229639.pdf&fcategory=Articles&AId=2502&fref=repec
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Paper provided by eSocialSciences in its series Working Papers with number id:2502.

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Date of creation: May 2010
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Handle: RePEc:ess:wpaper:id:2502
Note: Institutional Papers
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  1. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  2. Ghosh, Sugata & Mourmouras, Iannis A., 2004. "Endogenous growth, welfare and budgetary regimes," Journal of Macroeconomics, Elsevier, vol. 26(4), pages 623-635, December.
  3. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, 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. 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 162-86, May.
  6. 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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